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Is Energy Efficiency Priced in the Housing Market? - Large Sample Evidence From Germany

Author

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  • Marcelo Cajias
  • Franz Fürst
  • Sven Bienert

Abstract

The European Union introduced Energy Performance Certificates (EPC) in 2002 to all member states in order to enhance the environmental awareness in the real estate industry. EPCs act nowadays as a mandatory instrument in investment decisions when letting or selling new and particularly existing buildings. Empirical research across the member states has shown over the last years that energy conservation pays off as the financial benefits might exceed potential investment costs. Although Germany adopted a strict sustainability agenda to reach a carbon neutral stock by 2050, evidence about the potential energy premium in the housing market is scarce. In this paper we investigate the effect of energy performance measured by EPCs on asking rents in the German housing market based on a database involving more than 1,000,000 observations. We explore the relationship extensively between 2013 and 2014 using advanced semiparametric regression models and provide evidence of a substantial impact of energy savings on asking rents and thus on the buildings' performance.

Suggested Citation

  • Marcelo Cajias & Franz Fürst & Sven Bienert, 2015. "Is Energy Efficiency Priced in the Housing Market? - Large Sample Evidence From Germany," ERES eres2015_284, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2015_284
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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