The effect of energy performance certificates on the value of buildings

In a global sense, the concept of sustainability plays nowadays an important role in governments, society and especially in the real estate sector, which is responsible for 40% of final energy consumption in the European Union. This reflects not only the enormous potential of buildings in contributing to global changes, but also calls for actions and initiatives in order to reduce the ecological impact. The EU introduced the Energy Performance Certificates (EPC) in 2003 in order to enhance the environmental awareness in the real estate industry. EPCs are a mandatory instrument to assess the energetic performance of new but particularly of existing buildings. Since the EPCs clearly pursue the reduction of the footprint of buildings, investors and occupiers should be sensitized in energetic aspects in order to improve the demand for a green stock market. Energy potentials may pay off whenever the financial benefits are higher than the lost investment opportunities. Thus, the willingness to pay for energy savings may be transferred to diminished operational costs affecting the property value positively. However, the lack of empirical evidence across European countries could reduce future green investments and, thus, lessen energetic improvements. Following this research stream, the study expands the drivers of a demand for energy performance within the EU, in order to analyse empirically if energy savings lead to a price differentiation. For a large sample of buildings in Germany, the investigation provides a status quo of the energy performance of buildings for future regional policies and/or incentive programmes. The empirical results show the energy-saving-benefit over 2007 to 2010 and primarily provide the first evidence of the dynamics between green awareness and real estate value in Germany.