Real Estate Price Formation: Energy Performance Certificates and the Role of Real Estate Agents

Abstract

Improving energy efficiency in buildings is a major priority of industrialized countries. By eliminating market asymmetries, Energy Performance Certificates (EPCs) is a potential policy instrument when it comes to promoting energy efficiency of real estate. Real estate agents have an important role in providing information about dwellings for sale on the market. The aim of this paper is to study whether the introduction of EPCs changes the asking price setting of real estate agents. We take advantage of the fact that the introduction of a mandatory energy certification system represents a quasi-natural experiment, where we have data on house price and asking price. Based on the analysis, both of a hedonic model and a fixed effect model, we provide evidence that the implementation of EPCs did not affect the price setting of real estate agents. This indicates that real estate agents either disregard EPCs as providers of new information or believe that the market is indifferent to this kind of information. Our results also indicate that there are large similarities between the effects of energy labels on the asking prices and the transaction prices.