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Impact of Energy Rating on House Prices and Lending Rates

Author

Listed:
  • Gabor Hajnal

    (Magyar Nemzeti Bank)

  • Alexandr Maxim Palicz

    (Magyar Nemzeti Bank)

  • Sandor Winkler

    (Magyar Nemzeti Bank)

Abstract

The real estate market is a key component of the green transition, and thus it is worth examining the pricing and financing costs of modern residential buildings in Hungary. In our study, we investigate a) whether a significant price premium can be identified for green properties based on new housing projects in Budapest, and b) whether banks finance residential buildings with more advanced energy technologies at lower interest rates. Based on our regression estimation, the green price premium is clearly evident in the Budapest new housing market: on average, homes with an energy rating of BB or better are 5.1 per cent more expensive than homes with an energy rating of CC. Based on our estimate of housing loan interest rates, no significant difference can be identified in the interest rates on loans granted to finance properties with a certificate higher than CC compared to loans granted for properties with CC certificate, i.e. banks do not yet factor energy aspects into the pricing of loans.

Suggested Citation

  • Gabor Hajnal & Alexandr Maxim Palicz & Sandor Winkler, 2022. "Impact of Energy Rating on House Prices and Lending Rates," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 21(4), pages 29-56.
    • Handle: RePEc:mnb:finrev:v:21:y:2022:i:4:p:29-56
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    More about this item

    Keywords

    green financing; new homes; energy rating; housing loans;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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