Price and rent effects of energy efficiency in residential properties: evidence from the Belfast metropolitan area

Abstract

The core response to the Kyoto protocol policy is reflected in the Energy Performance of Building Directives due to the recognition of built environment as being one of the major contributors to the global Greenhouse Gases emission. In Europe, the Energy Performance Certificate (EPC) has become a mandatory requirement for all buildings including dwelling stocks. The perceived benefits of sustainable buildings have resulted in increased interest in measuring the implicit price and rent impacts of green/energy labels. However, the relationship between energy performance and residential property remains under-researched, geographically diverse, and inhibited by a paucity of data. This research aims to establish whether there is a green premium associated with residential buildings within the Belfast Metropolitan Area.

Hedonic pricing models are used to establish the complex relationship between property characteristics, energy performance ratings, and green features. The study has assembled 6,671 and 3,928 datasets consisting of property characteristics for sales and rental markets respectively from quarter one 2013 to quarter two 2014. Modelling techniques are specified in linear, semi-log, and price/rent per square metre to measure the implicit prices and rents of energy performance ratings in monetary, percentage, and monetary/percentage per square metre respectively.

The results illustrate evidence of a green premium effect. Using EPC scores as a measure of energy efficiency, an additional price of £435 or 0.3% or £4.32 psm per EPC score was evidenced for the owner-occupied market. Meanwhile, a premium of £1.39 or 0.2% or £0.02 psm per EPC score was observed for the private-rented market. Comparative models with banded EPC scores illustrated increased premium from energy inefficient to efficient houses. The largest magnitude of increase was observed for B rated houses (compared to D rated houses) with 26% and 16% of premiums observed in the owner-occupied and private-rented market respectively. Nonetheless, the premium is complicated by the heterogeneity of the existing property stock. Diminishing premium effect observed for new houses reflect no-bid factor for sustainability as they were assumed integrated into the houses by the market. In addition, the analysis suggested the potential for retrofitting of dwellings with existing low energy performance. In particular, the results from this thesis suggest that thermal features should be prioritised in retrofit measures. Specifically, current policies should target to improve energy efficiency of stocks through double-glazed windows, floor insulation, roof insulation, and wall insulation.

Overall, this study has established premiums related to better energy performance for both owner-occupied and private-rented markets. It also extends the body of literature by uncovering the specific sustainable feature that is giving impact to the price and rent structure of properties. Future studies may continue the debate by measuring energy efficiency effects of Home Quality Mark on house prices and rents and comparing it with EPCs.

Date of Award	May 2016
Original language	English
Supervisor	Jim Berry (Supervisor), Stanley Mc Greal (Supervisor) & Michael McCord (Supervisor)