Green Clientele Effects in the Housing Market

26 Pages Posted: 16 Dec 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

Elias Oikarinen

University of Turku, Department of Economics

Oskari Harjunen

Urban Research and Statistics, City of Helsinki

Date Written: December 14, 2015

Abstract

This study investigates how the energy efficiency ratings mandated by the European Union affect house prices. Using a sample of several thousand apartment transactions from Helsinki, Finland, we test whether higher ratings were significantly associated with higher prices. In addition to a large number of property and neighbourhood characteristics, this dataset contains information on building-level energy usage which allows us to distinguish between the 'pure' price effects of energy consumption and the value of more intangible factors associated with the energy label. The hedonic model yields a statistically significant 3.3% price premium for apartments in the top three energy-efficiency categories and 1.5% when a set of detailed neighbourhood characteristics are considered. When maintenance costs containing energy usage costs are added, a robust and significant price premium of 1.3% persists whereas no differentiation is found for the medium and lower rating categories. These findings may be indicative of segmented demand for energy-efficient buildings where price premia will only be observable for the top tier of energy ratings due to a 'green clientele effect'. However, a high energy rating did not appear to speed up the sales process in the analysed market.

Keywords: energy efficiency; energy performance rating; housing markets; price; time on market

JEL Classification: D1, R33

Suggested Citation

Fuerst, Franz and Oikarinen, Elias and Harjunen, Oskari, Green Clientele Effects in the Housing Market (December 14, 2015). Available at SSRN: https://ssrn.com/abstract=2703584 or http://dx.doi.org/10.2139/ssrn.2703584

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

Elias Oikarinen

University of Turku, Department of Economics ( email )

Turku, FIN-20500
Finland

Oskari Harjunen

Urban Research and Statistics, City of Helsinki ( email )

Helsinki
Finland

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