Are Energy Efficiency Ratings Ignored in the German Housing Market? – Evidence from a Large-Sample Hedonic Study

26 Pages Posted: 22 Jun 2016 Last revised: 17 Jan 2017

See all articles by Marcelo Cajias

Marcelo Cajias

PATRIZIA AG; Universität Regensburg

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

Sven Bienert

University of Regensburg - International Real Estate Business School (IREBS)

Date Written: June 22, 2016

Abstract

Improving the energy efficiency levels of housing is of particular concern in the private rental market where capital costs and subsequent utility cost savings are not shared in equal measure by landlords and tenants. This problem is particularly pronounced in Germany where rental properties make up the majority of the housing stock. The present study is the largest and most comprehensive study of the value of energy efficiency in the German housing market and investigates the effect of energy efficiency ratings on rental values across 412 markets in Germany. Using a semiparametric hedonic model and an empirical sample of nearly 500k observations with full hedonic characteristics, we find strong evidence that energy-efficient rental units are rented at a premium. A survival hazard model is then used to study the impact of the ratings on time-on-market. It is found that energy-efficient rental properties tend to lease up more quickly than their non-efficient peers. This study provides a very robust framework for policy makers and property companies for understanding how energy efficiency and expected utility costs of a rental property affect asking and effective rents.

Keywords: Energy efficiency, residential buildings, Hedonic model, Hazard model, German housing

Suggested Citation

Cajias, Marcelo and Fuerst, Franz and Bienert, Sven, Are Energy Efficiency Ratings Ignored in the German Housing Market? – Evidence from a Large-Sample Hedonic Study (June 22, 2016). Available at SSRN: https://ssrn.com/abstract=2799206 or http://dx.doi.org/10.2139/ssrn.2799206

Marcelo Cajias (Contact Author)

PATRIZIA AG ( email )

Fuggerstr. 26
Augsburg, 86150
Germany
+49 (0) 151 17215198 (Phone)

HOME PAGE: http://www.patrizia.ag

Universität Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053
Germany

Franz Fuerst

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

Sven Bienert

University of Regensburg - International Real Estate Business School (IREBS) ( email )

Universitaetsstrasse 31
Regenburg, Bavaria 93040
Germany

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