Rising energy costs and the premium for energy-efficient homes

This paper investigates the relationship between Energy Performance Certificate (EPC) ratings and residential property prices in Norway. Drawing on 62,137 single-family home transactions from 2011 to 2024, the study applies a log-linear hedonic pricing framework to estimate the capitalisation of energy performance into housing prices. The relationship between house prices and EPC ratings is estimated using OLS, recursive OLS, and quantile regressions, with additional estimates provided at the municipality level. Statistically significant positive price premiums of up to 13.3 per cent are estimated for dwellings in EPC bands A/B compared to those in band C, while bands D-G are associated with increasing price discounts of up to −26.6 per cent. Recursive estimates highlight the temporal dynamics of these effects, showing that the value premium of energy-efficient homes intensified during periods of high energy prices. Following the energy price shock associated with the war in Ukraine, the premium for the highest efficiency class rose from around 8 per cent to 13 per cent. These findings underscore the importance of energy costs and local market dynamics in shaping the capitalisation of EPCs into housing prices.