Could green cars drive up home prices?

18 May 2011 -

There’s plenty of things that affect house prices.

Falling consumer sentiment, rising interest rates and natural disasters, none of which help prices to grow.

The economy, which is looking up.  

And migration and birth rates (over the long term). New research shows we are still hurtling towards a "Big Australia", which points to continued growth of house prices in years to come.

But perhaps there’s a new factor about to drive over the horizon – the humble car. The green car, that is.

We all know that the closer you get to a busy road, the cheaper home prices tend to be.

Many buyers would prefer to be away from the traffic noise, and definitely don’t want to be sucking in the fumes spewing out of thousands of exhaust pipes rumbling past.

But could green cars change our view of good and bad streets? With eco cars now creeping closer to being a mainstream reality, will we see a redefining of the “best streets” as busy roads become much quieter and not nearly as smelly?

We’re probably not talking the next couple of years here, more like 10-15 years, perhaps even 20. Eco cars still have a way to go, particularly in price, before they become mainstream. But with all major car manufacturers now tinkering with models, they are close to being a normality on a road near you.

On the downside, green cars obviously won’t reduce congestion, so one the biggest turn-offs of living near a busy road will remain regardless of whether we’re driving an oil guzzler or a clean sun-powered machine.

But on the positive, and what could have a significant impact, is hybrid and electric cars definitely won’t be as noisy as many of the vehicles getting about at the moment – as evidenced by the fact they are already so hush hush that some manufacturers have started adding in artificial sounds to make them heard.

And green cars won’t produce as much pollution – at least while they are in motion. There might still be questions around the carbon that electric cars will create while charging if they are being powered by traditional coal-fired energy, but when they are on the road, some won’t produce any fumes at all.

I'm not suggesting major arterial roads, such as Parramatta Road in Sydney, or South Road in Adelaide, for example, are going to suddenly match it with waterfronts for prices. But you could envisage a situation where secondary roads, which still carry a fair bit of traffic, could become far more desirable places to live once the smell and the noise of traffic dissipates, even if the volume of cars is still there.

Quieter, cleaner roads still won't make them appealing to everyone. Families, for example, with young kids, may still avoid areas of high traffic for safety reasons. But they may not be so put off buying something just off a busy road as they would be now.

Economist Saul Eslake, from think tank the Grattan Institute, says intuitively the theory makes sense. But he cautions that numbers would have to reach critical mass before there was an effect.

"It would be at least five and possibly more than ten [years away]," Eslake says. "My guess would be at least half the cars on the road would have to be quieter and less smelly."

If dirty, fuel-belching cars become a thing of the past, do you think it would change the way we think of busy streets?