The value of domestic building energy efficiency - evidence from Ireland

- We estimate the effect of energy efficiency on property sale and rental prices.
- We examine how this effect varies according to market conditions.
- Energy efficiency has a significant, positive effect on property values.
- The premium is greater for property sales compared to rentals.
- The premium for energy efficiency is greater when market conditions are worse.

Following the transposition of the EU Energy Performance of Buildings Directive into Irish law, all properties offered for sale or to let in Ireland are obliged to have an energy efficiency rating. This paper analyses the effect of energy efficiency ratings on the sale and rental prices of properties in the Republic of Ireland. Using the Heckman selection technique we model the decision to advertise the energy efficiency rating of a property and the effect of energy efficiency ratings on property values. Our results show that energy efficiency has a positive effect on both the sales and rental prices of properties, and that the effect is significantly stronger in the sales segment of the property market. We also analyse the effect of energy efficiency across different market conditions and we find that the effect of the energy rating is generally stronger where market conditions are worse.