Everybody wants an energy-efficient home. After all, an energy-efficient home is comfortable to live in, without large energy bills. These can be important factors for prospective home owners or renters. Our review of international research found energy-efficient homes typically fetch a higher price.
The majority (23) of the 27 relevant studies we reviewed found more energy-efficient homes fetch higher prices than less energy-efficient, but otherwise comparable, homes. So what sort of price premium do houses with a higher energy rating attract? It’s typically around 5% to 10%.
Price effects were considered in two ways. The first involved comparing rated versus unrated residences. The second compared higher-rated residences with lower-rated ones. In both cases, a price premium was found to exist.
The reported price premium varied substantially by study, country and real estate market. One study, in Belfast, found a 27% price premium for higher-rated buildings. Another in the Netherlands found a price premium of 2.7% for similarly higher-rated dwellings.
Only one study looked at Australia (the ACT scheme, which has operated since 2003). It found a 2.4% price premium for a six-star house and a 9.4% premium for a seven-star house compared to a 3 star home. For Australia, with a median house price of $773,635 in late 2019, the ACT results equate to potential price premiums of $18,500 and $72,721.
Obviously, it isn’t just the energy rating of a house that affects its price. Location, size, age and other relevant features of a property influence the final price. Researchers use a statistical method, called hedonic regression, to estimate the effects of all these factors. A home energy rating was included as one of these factors.
The studies we reviewed were published between 2011 and 2019, covering 14 countries and ten energy performance rating schemes. Most of the studies (18) considered the European Union’s Energy Performance Certificate (EPC). Although there are differences in how each EU country defines and manages these certificates, they are broadly comparable, in that they use a standard A (high) to G (low) grade.