Is Energy Efficiency Priced in the Housing Market? Some Evidence from the United Kingdom

34 Pages Posted: 26 Feb 2013 Last revised: 26 Apr 2013

See all articles by Franz Fuerst

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

Patrick M. McAllister

University of Reading - Department of Real Estate and Planning

Anupam Nanda

University of Reading - School of Real Estate & Planning, Henley Business School

Peter Wyatt

University of Reading - Department of Real Estate and Planning

Date Written: February 26, 2013

Abstract

This paper investigates whether energy performance ratings, as measured by mandatory Energy Performance Certificates (EPCs), are reflected in the sale prices of residential properties. This is the first large-scale empirical study of this topic in the UK involving approximately 400,000 dwellings in the period from 1995 to 2011. Applying hedonic regression and an augmented repeat sales regression, we find a positive relationship between the energy efficiency rating of a dwelling and the transaction price per square metre. The price effects of superior energy performance tend to be higher for terraced dwellings and flats compared to detached and semi-detached dwellings. The evidence is less clear-cut for house price growth rates but remains supportive of an overall positive association. Overall, the results of this study appear to support the hypothesis that energy efficiency levels are reflected in UK house prices, at least in recent years.

Keywords: energy efficiency, house prices, eco-labelling, hedonic models

JEL Classification: R31, Q4, R21, D12, D4

Suggested Citation

Fuerst, Franz and McAllister, Patrick M. and Nanda, Anupam and Wyatt, Peter, Is Energy Efficiency Priced in the Housing Market? Some Evidence from the United Kingdom (February 26, 2013). Available at SSRN: https://ssrn.com/abstract=2225270 or http://dx.doi.org/10.2139/ssrn.2225270

Franz Fuerst (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

Patrick M. McAllister

University of Reading - Department of Real Estate and Planning ( email )

Reading RG6 6AW
United Kingdom

Anupam Nanda

University of Reading - School of Real Estate & Planning, Henley Business School ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Peter Wyatt

University of Reading - Department of Real Estate and Planning ( email )

Reading RG6 6AW
United Kingdom

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