Real Estate

Green Energy Label Triggers 2% Price

May 27, 2014

Research by TIAS School for Business and Society, the business school of Tilburg University, shows that the Green Label helps to sell Dutch homes quicker and at a higher price. For the 15% of homes that were sold with an energy label over the first three months of 2014, results showed that sales took 102 days less to reach a transaction, and that green labeled homes were sold for 4.000 euros more than average.

Image: © Nationale Beeldbank

“It appears that after the first years of label introduction, energy certification has gained a firm position in the Dutch housing market. More buyers are looking out for what labels have to say, and the fact that prices vary according to label classification implies that future utility bills are considered during the sale process”, prof. dr. Dirk Brounen, Professor of Real Estate Economics, at TIAS and research leader of this analysis, claims.

Every quarter researchers of TIAS link housing transactions to energy label data, and explore the market share and effects of energy certification in the Dutch homeowner market. Figure 1 (on the left) shows that the market share stabilized at the current level of 14.7%. On average, the labeled dwellings needed 102 days less to find a buyer. Moreover, if the energy label was ‘green’ (label A or B), the dwelling sold at a premium of 2.0%.

The energy label is included a hedonic analysis of quarterly housing sales. Both the sale time and the sale price are analyzed. In the first quarter of 2014, 2,715 labeled transactions were analyzed this way. Figure 3 shows that the effect on the sale time is increasing over time.

Since 2010, labeled dwellings sell quicker and this momentum is gaining force. Regarding the green price premium, figure 4 shows that a positive price premium has been common since the market introduction in 2008. This quarterly analysis is based on the hedonic modeling that is described and validated by Brounen and Kok (2011) “On the economics of energy labels in the housing market” in the Journal of Environmental Economics and Management. In this analysis, they carefully control for the known price- and sale time effects of location, dwelling age and -quality. In order to update these 2011 results, the researchers repeat their analysis on a progressing window of data that combines housing data by the Dutch realtor association (NVM) and label information supplied by AgencyNL.

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