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On the use of Hedonic Regression Models to Measure the Effect of Energy Efficiency on Residential Property Transaction Prices: Evidence for Portugal and Selected Data Issues

Author

Listed:
  • Rui Evangelista
  • Esmeralda A. Ramalho
  • João Andrade e Silva

Abstract

Using a unique dataset containing information of around 256 thousand residential property sales, this paper discloses a clear sales premium for most energy efficient dwellings, which is more pronounced for apartments (13%) than for houses (5 to 6%). Cross-country comparisons support the finding that energy efficiency price premiums are higher in the Portuguese residential market than in central and northern European markets. Results emphasize the relevance of data issues in hedonic regression models. They illustrate how the use of appraisal prices, explanatory variables with measurement errors, and the omission of variables associated with the quality of the properties, may seriously bias energy efficiency partial effect estimates. These findings provide valuable information not only to policy-makers, but also to researchers interested in this area.

Suggested Citation

  • Rui Evangelista & Esmeralda A. Ramalho & João Andrade e Silva, 2019. "On the use of Hedonic Regression Models to Measure the Effect of Energy Efficiency on Residential Property Transaction Prices: Evidence for Portugal and Selected Data Issues," Working Papers REM 2019/64, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp0642019
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    References listed on IDEAS

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    More about this item

    Keywords

    Portugal; energy efficiency; residential property market; hedonic price models; cross-country comparisons;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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