Variations in the Implicit Pricing of Energy Performance by Dwelling Type and Tenure: A Study of Wales

40 Pages Posted: 22 Jul 2015

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: July 20, 2015

Abstract

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

Suggested Citation

Fuerst, Franz and McAllister, Patrick M. and Nanda, Anupam and Wyatt, Peter, Variations in the Implicit Pricing of Energy Performance by Dwelling Type and Tenure: A Study of Wales (July 20, 2015). Available at SSRN: https://ssrn.com/abstract=2633539 or http://dx.doi.org/10.2139/ssrn.2633539

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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