Green signalling effects in the market for energy-efficient residential buildings

Franz Fuerst*, Elias Oikarinen, Oskari Harjunen

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


Empirical evidence from recent studies suggests that the price premium on energy-efficient buildings is potentially higher than the pure capitalisation of energy savings but the empirical evidence on the size of the non-savings components is scant. This study aims to fill this research gap by investigating whether the mandatory energy efficiency ratings for residential properties imply benefits that go beyond energy savings. Using a sample of several thousand apartment transactions from Helsinki, Finland, we first test if higher ratings were significantly associated with higher prices. In addition to a large number of property and neighbourhood characteristics, this dataset contains information on building-level energy usage which allows us to distinguish between the cost savings effect of energy consumption and the value of more intangible factors associated with the energy label. The hedonic model yields a statistically significant 3.3% price premium for apartments in the top three energy-efficiency categories and 1.5% when a set of detailed, neighbourhood characteristics are included. When maintenance costs containing energy usage costs are added, a robust and significant price premium of 1.3% persists whereas no differentiation is found for the medium and lower rating categories. These findings may be indicative of energy-efficient buildings having signalling value - and therefore an additional incentive to invest in such buildings - for 'green' consumers. However, a favourable energy rating did not appear to speed up the sales process in the analysed market. (C) 2016 Elsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)560-571
Number of pages12
JournalApplied Energy
Publication statusPublished - 15 Oct 2016
MoE publication typeA1 Journal article-refereed


  • Housing
  • Signalling value
  • Energy efficiency
  • Energy performance rating
  • Hedonic pricing
  • Time on market


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