Does energy efficiency matter to home-buyers? An investigation of EPC ratings and transaction prices in England

• We apply hedonic model to test effect of energy efficiency rating on house prices.
• We use a sample of English dwellings with Energy Performance Certificate (EPC) data.
• Dwellings in EPC bands A and B sell for a 5% premium, all else equal; for C, it is 1.8%.
• The effect is about £8900 on an average house price (£177,824 as of Aug. 2014).
• There is considerable variation in these effects by region and property types.

This paper investigates whether energy performance ratings, as measured by mandatory Energy Performance Certificates (EPCs), are reflected in the sale prices of residential properties. This is the first large-scale empirical study of this topic in England involving 333,095 dwellings sold at least twice in the period from 1995 to 2012. Applying hedonic regression and an augmented repeat sales regression, we find a positive relationship between the energy efficiency rating of a dwelling and the transaction price per square metre. The price effects of superior energy performance tend to be higher for terraced dwellings and flats compared to detached and semi-detached dwellings. The evidence is less clear-cut for rates of house price growth but remains supportive of a positive association. Overall, the results of this study suggest that energy efficiency labels have a measurable and significant impact on house prices in England.