The economic value of sustainability: energy performance and housing market

Ezio Micelli, Giulia Giliberto, Eleonora Righetto and Greta Tafuri

ERES from European Real Estate Society (ERES)

Abstract: The international commitment to the energy transition of the housing stock is essential to meet the global challenges of decarbonisation and reduce CO2 emissions. The building sector is responsible for 40% of fossil fuel consumption and 30% of CO2 emissions, making energy performance upgrades urgent. Recent research highlights the impact of energy performance on property value, revealing inequalities related to energy efficiency. The research investigates whether highly efficient homes present a premium price over less efficient ones and whether this premium differs according to the city's size and vibrancy of the housing market. The study focuses on six Italian cities, three metropolitans (Milan, Turin, and Florence) and three medium-sized (Padua, Mestre, and Bergamo), analysing over 2,935 ask prices. The methodology employs the Hedonic Price Model to estimate the premium price related to different energy performance levels. The results show a market segmentation according to energy efficiency, with premium prices converging in medium-sized and metropolitan cities. The average gap between high-efficiency properties (class A) and low-efficiency properties (class G) is about 30% for medium-sized cities, narrowing to 14% between class D and class G properties. For metropolitan cities, the average gap between high-efficiency properties (class A) and low-efficiency properties (class G) is about 15%, decreasing to 6% between class D properties compared to class G properties.The findings highlight a higher depreciation in properties in less active medium-sized cities compared to those in more dynamic metropolitan areas. Metropolitan cities seem to be less affected by their position in the EPC ranking, while the energy transition shows more significant effects in medium-sized cities. This implies a possible additional difficulty for struggling territories, accentuating social and economical inequalities.

Keywords: Built Environment; Energy transition; Hedonic Prices; Real Estate Market (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-ure
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