Energy Price Shock and Housing Market Dynamics: Evidence from Germany

Abstract

This paper analyses the impact of the energy price shock following Russia’s invasion of Ukraine in 2022 on housing prices in Germany, focusing on the price differences between the most energy-efficient dwellings (MEED) and less energy-efficient dwellings (LEED). Using a difference-in-differences approach on a comprehensive housing market dataset, the study finds that LEED have seen relative price declines in the purchase market and rental market, reflecting a growing premium for energy efficiency. The analysis reveals heterogeneity across regions and property types. The paper contributes to the literature on energy price premiums in the housing sector, providing empirical insights into how rising energy costs and policy measures, such as the Energy Performance of Buildings Directive (EPBD) and CO2 pricing, may shape long-term housing market dynamics. The findings additionally indicate that energy efficiency plays a more significant role in property valuations, carrying important implications for housing policy and market stability.

Keywords: Housing Market Dynamics, Energy Price Shock, Energy Efficiency