European Energy Crisis: Did Electricity Prices Shock Real Estate Markets?

Abstract

This paper investigates the impact of the 2021–2022 European energy crisis, a significant macro-financial shock, on homebuyer willingness-to-pay for energy-efficient homes in Norway. Leveraging the country’s electricity market—characterized by five distinct regions with varying exposure to European power prices—as a quasi-experiment, we analyze how energy price shocks influence housing market dynamics. Applying a triple differences regression framework to real estate transactions, we find that home prices in regions affected by the shock fell significantly relative to unaffected regions, with single-family dwellings outside major cities experiencing the largest declines. While energy-efficient homes appeared less vulnerable, this effect was only marginally significant. Moreover, the negative price effects persisted despite the introduction of electricity price subsidies. These findings highlight the complex relationship between energy costs, housing market valuations, and buyer preferences, offering generalizable insights into the resilience of housing markets to macro-financial shocks and the role of policy interventions in mitigating their effects.

Keywords: energy price shock, housing market, energy efficiency, energy performance certificate, government subsidy, macro-financial shocks JEL Classification: D12

JEL Classification: D12, G14, H23, L94, P18, Q4, R2, R3