Green Clientele Effects in the Housing Market
26 Pages Posted: 16 Dec 2015
Date Written: December 14, 2015
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
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