Energising Property Valuation: Putting a Value on Energy-Efficient Buildings

Abstract

Key words like sustainability, green building, energy efficiency, triple bottom line, and corporate social responsibility increasingly affect the real estate business and therefore most of the related decision making processes. But what effect does sustainability have on property market values? A lot of discussion and research has already been undertaken to analyze possible impacts of sustainable characteristics on property values. Until now, little significant quantitative empirical evidence has been found, and if so, it s usually related to US real estate markets and the sustainability certifications of LEED and Energy Star. In 2002, the EU Energy Performance of Buildings Directive (EPBD) was adopted to improve the energy efficiency of buildings. The IMMOVALUE-project, granted by the program of Intelligent Energy Europe, analyzed the possibility of implementing characteristics of energy efficiency into property valuation practice using data from the mandatory energy-performance certificates. One result of the project was that if detailed property market data are available, multiple regression analysis in the framework of hedonic pricing models could be applied to consider, and empirically establish, the effects of energy efficiency characteristics on properties values. This article focuses on the possibility of integrating aspects of energy efficiency into income-related property valuation approaches.