The Increasing Value of Green for Residential Real Estate

Aroul, Ramya Rajajagadeesan; Rodríguez, Mauricio

doi:10.1080/10835547.2017.12091894

Cited by 24 publications

(14 citation statements)

References 17 publications

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“…For example, analyses examined the diffusion patterns (and as a result the demand for) sustainable construction technologies [10] and housing in the U.S. [11]-observing that demand was influenced by climate, policy, and economic conditions. Relatedly, studies have suggested that homes with sustainable features and locations created competitive advantage for owners [13,[44][45][46][47][48]. This competitive advantage has carried over to lenders as borrowers on energy efficient homes and homes in more walkable areas tended to be less likely to default on their mortgages than borrowers on similar traditional homes [12,14].…”

Section: Literature Reviewmentioning

confidence: 99%

Effects of Bank Lending on Urban Housing Prices for Sustainable Development: A Panel Analysis of Chinese Cities

et al. 2018

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Stable home prices are critical to a healthy housing market and sustainable development. Home prices in many Chinese cities have increased dramatically in past decades. The China's central bank uses two primary monetary controls on overheated housing prices: the bank lending supply and lending rate. However, little to no evidence informs whether the nation-level bank lending controls are effective at the city level. Unlike extant studies that only focus on nation-level effects of such controls, this research analyzes long-run effects on housing prices at the national, regional, and city levels. The authors perform cross-sectional time-series regressions on empirical data from 35 major Chinese cities for the period 2003 to 2015. Results confirm that controlling lending rates is effective as a long-term measure at the national, regional, and city levels, whereas controlling the lending supply is effective as a short-term measure for many cities. Results also reveal that housing prices cause lending supply changes for many regions in a long run and indicate that credit policy often lags in response to housing price changes. Findings show that the effectiveness of bank lending largely varies at the city level, suggesting city-tailed bank lending rather than the centralized controls at the national level.

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Section: Literature Reviewmentioning

confidence: 99%

Effects of Bank Lending on Urban Housing Prices for Sustainable Development: A Panel Analysis of Chinese Cities

et al. 2018

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“…This finds credence with Wilkinson and Sayce (2019) who suggest that the impact of energy efficiency on value is small compared to other 'value' drivers and therefore requires more nuanced discussions in terms of the relationship between energy efficiency and market behaviours. Certainly, the extant literature base indicates that energy performance research and debate should not generalize findings for one market across markets that have different climates or attitudes regarding green amenities, suggesting that it remains very much a behavioural issue which can imply that there is limited uptake across housing markets in an aggregation sense (Aroul and Rodriguez, 2017). This is further Research such as Cerin et al (2014) has indicated that findings are determined by housing segmentation as the energy performance relationship differs according to the type of housing and particular housing segments highlighting the requirement to analyse the performance across the entirety of the sales sample for enhanced policy targeting and support.…”

Section: Literaturementioning

confidence: 99%

Energy performance certificates and house prices: a quantile regression approach

McCord

Haran

Davis

et al. 2020

JERER

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Purpose A number of studies have investigated the relationship between energy performance certificates (EPCs) and house prices. A majority of studies have tended to model energy performance pricing effects within a traditional hedonic conditional mean estimate model. There has been limited analysis that has accounted for the relationship between EPCs and the effects across the pricing distribution. Moreover, there has been limited research examining the “standard cost improvements EPC score”, or “potential score”. Therefore, this paper aims to quantify and measure the dynamic effects of EPCs on house prices across the price spectrum and account for standardised cost-effective retrofit improvements. Design/methodology/approach Existing EPC studies produce one coefficient for the entirety of the pricing distribution, culminating in a single marginal implicit price effect. The approach within this study applies a quantile regression approach to empirically estimate how quantiles of house prices respond differently to unitary changes in the proximal effects of EPCs and structural property characteristics across the conditional distribution of house prices. Using a data set of 1,476 achieved transaction prices, the quantile regression models apply both assessed EPC score and bands and further examine the potential EPC rating for improved energy performance based on an average energy cost improvement. Findings The findings show that EPCs are valued differently across the quantiles and that conditional quantiles are asymmetrical. Only property prices in the upper quantiles of the price distribution show significant capitalisation effects with energy performance, and only properties with higher EPC scores display positive significant effects at the higher end of the price distribution. There are also brown discount effects evident for lower-rated properties within F- and G-rated EPC properties at the higher end of the pricing distribution. Moreover, the potential energy efficiency rating (score) also shows increased effects with sales prices and appears to minimise any brown discount effects. The findings imply that energy performance is a complex feature that is not easily “averaged” for valuation effect purposes. Originality/value While numerous studies have investigated the pricing effects of EPCs, they have tended to provide a single estimate to determine the relationship with price. This paper extends the traditional analytical insights beyond the conditional mean estimate by examining the quantiles of the relationship between EPCs and house prices to enhance the understanding of this esoteric and complex issue. In addition, this research applies the assessed energy efficiency potential to establish whether effective cost improvements enhance the relationship with sales price and capitalisation effects.

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“…The literature has evolved with studies examining energy efficiency in a time series or spatial orientated framework. Aroul and Rodriguez (2017) examining the temporal variations in green premiums, make a compelling argument not to generalise ﬁndings for one market across markets that have different climates or attitudes regarding green amenities, recommending that policymakers should develop more tailored programmes that help lower income individuals gain access to the growing beneﬁts of green amenities. Similarly, concentrating on the apartment sector, however in a more spatial approach, Taltavull et al (2017) investigate the impact of energy performance on transaction prices in Bucharest.…”

Section: Literaturementioning

confidence: 99%

An exploratory investigation into the relationship between energy performance certificates and sales price: a polytomous universal model approach

McCord

Davis

McCord³

et al. 2020

JFMPC

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Purpose The role of energy efficiency and particularly energy performance certificates (EPCs) has emerged as a topical and important aspect of real estate markets. Various studies have been carried out investigating the perceived capitalisation effects of energy efficiency on property prices. There, however, remains divergence of opinion whether the capitalisation effect is truly in existence with extant research showing differing magnitudes of effects, if any. To date, no study (that the authors are aware of) has investigated the nature of the transition between EPC bands and price effects. The purpose of this study is to add to the research of the energy efficiency of housing to examine the nature of the likelihood of property characteristics being associated with higher EPC scores and value. Design/methodology/approach This research undertakes a suite of methodological tests to investigate the more latent relationships between EPC bands and pricing behaviour using 3,797 achieved sales prices within the Belfast housing market. Binary logit regression models are specified in conjunction with a Polytomous Universal Model to examine the likelihood of EPC bands falling within a particular property type and the likelihood of any pricing effects. Findings The findings show the differing property types to comprise very distinct and complex relationships in terms of price and EPC banding. The binary logit model estimations for both terrace properties and apartments reveal an increased likelihood to obtain higher EPC scores, with the semi-detached sector displaying a “mixed effect” with detached property revealing decreased probability of having superior energy performance and decreased likelihood of having poorer energy performance. The ordinal model estimations indicate that sales price comprises no relationship with energy performance, inferring that there is no increased probability of an increase in sales price with higher EPC rating. Originality/value This research offers new insights and focus on achieving a better understanding of the nexus between energy performance and property characteristics using alternative modelling approaches. This provides more exploratory insights into the complex relationships and offers awareness for policy discourse in terms of targeting properties which will tend to be poorer in energy efficiency.

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The Increasing Value of Green for Residential Real Estate

Cited by 24 publications

References 17 publications

Effects of Bank Lending on Urban Housing Prices for Sustainable Development: A Panel Analysis of Chinese Cities

Effects of Bank Lending on Urban Housing Prices for Sustainable Development: A Panel Analysis of Chinese Cities

Energy performance certificates and house prices: a quantile regression approach

An exploratory investigation into the relationship between energy performance certificates and sales price: a polytomous universal model approach

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