Energy Performance Ratings and House Prices in Wales: An Empirical Study

The aim of this research was to investigate the price effect of EPC ratings on the residential dwelling prices in Wales. It examined the capitalisation of energy efficiency ratings into house prices using two approaches. The first adopted a cross-sectional framework to investigate the effect of EPC band (and EPC rating) on a large sample of dwelling transactions. The second approach was based on a repeat-sales methodology to examine the impact of EPC band and rating on house price appreciation. A concern with hedonic price models is potential omitted variable bias. In the context of this study, dwellings in higher EPC bands may have been subject to unobserved improvements that enhance their quality as well as their energy performance. With this in mind, a series of robustness checks were undertaken, the main purpose of which was to restrict the sample to dwellings built relatively recently, and to exclude dwellings that are more likely to have been improved or that may be unusual in some way à dwellings that have been re-sold within a short period of time for example.