Energy Labelling and Residential House Prices: Some Evidence from the United Kingdom

Following the EU Energy Performance of Buildings Directive requiring all buildings at construction, sale or rent (or every ten years) to have certificates providing information about their energy performance through a rating of CO2 emissions, Energy Performance Certificates (EPCs) and the Display Energy Certificates (DECs) were introduced in the UK in 2008. An EPC consists of an asset rating which is intended to inform potential buyers or occupiers about the intrinsic energy performance of a building. In the same vein as consumer products, buildings are rated on a scale A to G with A being the most efficient. This paper outlines the results of the first large-scale empirical analysis of their effects on residential property prices in England and Wales. It draws upon a sample of approximately 400,000 dwellings in England and Wales that had sold in the period from 1995 to 2011. To enable repeat-sales analysis, the sample included a large proportion of dwellings that had sold more than once. The hedonic model specifications reveal that compared to dwellings EPC rated G, dwellings with better EPC ratings have sold at a significant price premium. This willingness to pay for superior EPC ratings are robust and consistent across several model specifications and samples.