For generations, the classic Australian home was seen as a free-standing, brick house on a suburban street, with a big backyard and hoist clothesline. If you close your eyes and picture it, you can hear the fly screen door banging shut. But with rising housing costs, increasing urban density, and the urgency of climate action, that dream is evolving. Affordable, sustainable apartments are not just a necessity, they are becoming the new standard. (above image source: Rise and Thrive: Sustainable apartments for a resilient Australia, GBCA, Feb 2025)

Faced with climbing housing costs, the intensifying climate crisis, and our increasingly dense cities and inner suburbs, the idea of home is being pushed to change. A new Australian home, one that is affordable, resilient to environmental challenges, sustainable, and well-located, is on the rise — and increasingly, that is an apartment.

“Australians are choosing apartments not just out of necessity but as a deliberate lifestyle choice. As our cities evolve, we must ensure these homes meet the highest sustainability and liveability standards—reducing environmental impact, conserving resources, and fostering healthier communities”, says Green Building Council of Australia CEO, Davina Rooney.

Sustainably built and operated homes cut carbon emissions, reduce reliance on fossil fuels and lower energy costs for residents – which is critical when you consider that 24% of Australia’s electricity and 10% of total carbon emissions come from residential buildings.

While Green Star Homes sets the benchmark for sustainable houses, the new Green Star Buildings – Apartments Pathway, throws a wider net, ensuring apartments can be independently verified for their sustainability credentials. This gives buyers, renters, and financiers the confidence to invest in homes that are healthier, more efficient, and built for the future.

Sustainable apartments offer an effective dual answer to Australia’s twin challenge of housing affordability and climate resilience.

And the opportunities that come with embracing sustainable building practises are vast. Along with the positive environmental outcomes that are the result of quality, all electric homes, sustainable apartments alleviate financial pressures by reducing utility expenses, making high quality, climate resilient housing achievable for more Australians.

As extreme weather events become more frequent, sustainable apartments are the more resilient option, offering shelter that is better suited to heatwaves and other climate related stresses.

Green Star apartments are also healthier. With no gas, and the use of better building materials including reducing VOCs, there are fewer indoor pollutants, reducing asthma risk by up to 42%.

But it’s not just needed, sustainable apartments are growing in demand.

1.8 million new households are expected to form by 2033, including 563,600 single-person households. Current research shows that consumer interest in sustainable apartments is strong.

“The data is clear—buyers and renters are actively seeking sustainable homes. With 81% of buyers considering sustainability features as critical or important, and energy-efficient apartments commanding an 11.7% premium, the industry has a significant opportunity to meet this demand,” explains Ms. Rooney.

And with 92% of renters confirming that energy efficiency ratings also influence their decisions, it begs the question, the interest is there – so what’s the roadblock?

To better understand the barriers facing the supply of sustainable, affordable, and well-located dwellings, we need to look at where we are today.

Looking at Australia’s residential market

Australia’s apartment market is driven by population growth, the job market and rising incomes.

Of the nearly 9.8 million households in Australia, 67% are homeowners and 31% renters. Currently, 29% of all households live in apartments or townhouses – a number that continues to rise. Over the next eight years, the number of households is expected to increase by almost two million. However, Housing Australia predicts a shortfall of 62,300 in apartments and medium-density dwellings by 2027.

Despite demand and population growth, the delivery of sustainable apartments has faced obstacles, such as:

• Speculative development: Most apartments are built-to-sell, prioritising quick returns over sustainability.
• Reliance on pre-sales: Developers depend on pre-sales for finance, often selling to investors who focus on short-term value rather than long-term efficiency.
• Strata ownership challenges: Joint ownership complicates decision-making.
• Profit-driven feasibility: Energy efficiency is often sacrificed to maximise profit.
• Boom-bust cycles: Market volatility discourages investment in innovation.
• Government and industry inertia: Resistance to change.

With this influx of households, we have an opportunity to make the next iteration of the dream Australian home a sustainable and affordable one. And should industry embrace sustainable building practices at scale now, we could enter the next decade with resilient housing stock that caters to the expanding urban population and supports residents as the climate changes.

Sustainable apartments: financing the opportunity

It’s easy to understand why sustainable apartments are better for people and the planet, but the opportunities extend to the finance industry too.

Investing in sustainable apartments can assist those in the finance industry with meeting climate disclosure obligations, and ESG goals. Australia’s first mandatory climate-related reporting came into effect on the 1 January 2025, which means banks are required to track and report how green loans and financial products are supporting climate-resilient developments.

New research released in the report Rise and Thrive, developed by the Green Building Council of Australia and Gateway Bank to explore the financial and lifestyle benefits of sustainable apartments, highlights just how crucial green loans are.

A survey by Gateway Bank shows Australian buyers are predominantly driven by pricing considerations when looking to buy a sustainable apartment, but critically, it shows there is a lack of clarity when it comes to eligibility for green loans, incentives, and the benefits available to them.

Lexi Airey, Chief Executive Officer Gateway Bank, said their research shows that green finance plays a significant role in supporting consumers to make more sustainable choices.

“Gateway Bank’s survey of more than 1,000 Australians found that 74.5% looking for an apartment would consider a green home loan to support their pursuit of energy efficient and environmentally friendly space.”

When asked what potential features of a green home they found most attractive:

• 6 out of 10 (59.2%) respondents said discount pricing.
• Just over a third (35%) said recognition of the home’s sustainability.
• Almost a third (31.6%) said borrowing from an environmentally-conscious institution
• A majority (87.2%) of respondents said an energy-efficient certification would influence their buying decision.

“The Green Star apartments pathway will help buyers and renters identify homes that are aligned with their expectations and provide industry with an independent standard that allows for greater confidence that their homes are comfortable, healthy, and built for the future,” said Ms Rooney.

Green finance is one of the missing components when it comes to Australia developing more sustainable apartments at scale. And despite the growing list of lenders offering green loans for free-standing homes, the absence of the equivalent for apartments reveals a key gap in the market waiting to be filled.

While living in a high-quality, healthy, and sustainable home resonates, the greatest appeal behind green loans is the tangible financial benefit. This is a huge opportunity, and challenge for lenders – raising awareness and addressing misconceptions could unlock a significant portion of the apartment market.

Gateway Bank has confirmed it will accept the Green Star Buildings – Apartments Pathway certification as part of its Green Home Loan eligibility criteria, a move other banks are expected to follow.

At a glance: financial benefits of a Green Star rated apartment

“With savings on energy bills, lower borrowing costs through green loans, and increasing property value, sustainable apartments don’t just benefit the environment—they make financial sense. Our challenge now is ensuring these benefits are accessible to all Australians,” Ms Rooney said

Over 30 years, a Green Star apartment in Sydney could deliver nearly $111,000 in total financial gains through cheaper loans, lower energy costs, and higher appreciation.

A comparison of a two-bedroom Green Star apartment in Sydney with a typical apartment, based on a property priced at $900,000 with a $700,000 home loan, found:

• Energy savings of 20% to 25% per year will add up to over $25,000 over 30 years.
• Home loan repayment savings from a green loan exceed $40,000 over 30 years.
• Apartment appreciation is the biggest factor, with an estimated $45,000 increase in value over 30 years.
• Total financial benefit grows from just over $21,000 in Year 1 to almost $111,000 over three decades

Looking to the future – we will arrive there together

With a 1.8 million surge in households expected by 2033 and increasing climate pressures – the next steps are clear.

To meet the demand for healthy, climate resilient and affordable homes at scale, developers and financiers need to come together. Developers must embed sustainability in the design phase of residential developments ensuring homes are designed for energy efficiency and climate resilience, educate potential buyers about sustainability benefits, and collaborate with financiers. Financiers must seek partnerships with sustainable developers and create tailored green loan products for apartments that consumers are educated on.

“A stronger National Construction Code, mandatory energy rating disclosures, and independent voluntary standards like Green Star are key to accelerating the shift to sustainable apartments. Bridging the gap between policy, finance, and consumer demand is how we make this the new norm in Australia,” explained Ms Rooney.

“By aligning finance, policy, and consumer demand, we can ensure sustainable apartments aren’t just an option—they become the norm. The opportunity is here. Now, it’s time to rise to the occasion.”

You can find out more about the role of green finance in making sustainable apartments accessible for Australians in the Rise and Thrive report and learn more about the new Green Star Buildings – apartment pathway, on the GBCA website.