Variations in the Implicit Pricing of Energy Performance by Dwelling Type and Tenure: A Study of Wales
40 Pages Posted: 22 Jul 2015
Date Written: July 20, 2015
This paper investigates the price effect of EPC ratings on the residential dwelling prices in Wales. It examines the capitalisation of energy efficiency ratings into house prices using two approaches. The first adopts a cross-sectional framework to investigate the effect of EPC band (and EPC rating) on a large sample of dwelling transactions. The second approach is based on a repeat-sales methodology to examine the impact of EPC band and rating on house price appreciation. The results show that, controlling for other price influencing dwelling characteristics, EPC band does affect house prices. This observed influence of EPC on price may not be a result of energy performance alone; the effect may be due to non-energy related benefits associated with certain types, specifications and ages of dwellings or there may be unobserved quality differences unrelated to energy performance such as better quality fittings and materials. An analysis of the private rental segment reveals that, in contrast to the general market, low-EPC rated properties were not traded at a significant discount. This suggests a lower implicit price for energy efficiency when the owner is not responsible for covering the cost of energy in a dwelling.
Keywords: energy efficiency, housing markets, hedonic models, implicit prices, split incentive problem
JEL Classification: R33, Q2, Q4, M2, C31, C5
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