IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v15y2022i1p507-d1017678.html
   My bibliography  Save this article

Identifying Market Segment for the Assessment of a Price Premium for Green Certified Housing: A Cluster Analysis Approach

Author

Listed:
  • Dong Hyun Kim

    (Department of Architectural and Urban Studies, Graduate School of Industry, University of Ulsan, Ulsan 680-749, Republic of Korea)

  • Amina Irakoze

    (Department of Architectural Engineering, School of Architecture, University of Ulsan, Ulsan 680-749, Republic of Korea)

Abstract

While the literature confirms the existence of a green premium, various researchers have acknowledged the importance of homogeneity in the dataset used for premium assessment. This study developed a systematic approach to extract a sales subsample containing transactions from green-certified apartments and their most similar counterparts based on cluster analysis. The study applied k-means and PAM clustering algorithms to split an extensive sales sample of 81,605 transactions into sales subsamples. A sales subsample containing transactions from green-certified apartments and their peers was extracted and used for green premium estimation. The results indicate that through cluster analysis, a market segment containing above 80% of the total housing transactions from green-certified apartments could be identified. Through the hedonic model, a green premium of 26.2% was identified from the entire sales sample (no market segmentation). However, this value was reduced to 12.2 and 17.8% when estimated from a sales subsample extracted through k-means and PAM clustering, respectively. These findings have implications for the close assessment of green certification impact on the sale prices. In addition, they can also serve as an indicator of housing categories that need extra effort to promote green practices in that particular market segment.

Suggested Citation

  • Dong Hyun Kim & Amina Irakoze, 2022. "Identifying Market Segment for the Assessment of a Price Premium for Green Certified Housing: A Cluster Analysis Approach," Sustainability, MDPI, vol. 15(1), pages 1-16, December.
    • Handle: RePEc:gam:jsusta:v:15:y:2022:i:1:p:507-:d:1017678
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/15/1/507/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/15/1/507/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Carlos Marmolejo-Duarte & Ai Chen, 2019. "The Uneven Price Impact of Energy Efficiency Ratings on Housing Segments. Implications for Public Policy and Private Markets," Sustainability, MDPI, vol. 11(2), pages 1-23, January.
    2. Eun Jung Kim & Hyunjung Kim, 2020. "Neighborhood Walkability and Housing Prices: A Correlation Study," Sustainability, MDPI, vol. 12(2), pages 1-18, January.
    3. Mats Wilhelmsson, 2019. "Energy Performance Certificates and Its Capitalization in Housing Values in Sweden," Sustainability, MDPI, vol. 11(21), pages 1-16, November.
    4. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    5. Franz Fuerst & Constantine Kontokosta & Patrick McAllister, 2014. "Determinants of Green Building Adoption," Environment and Planning B, , vol. 41(3), pages 551-570, June.
    6. Piet Eichholtz & Nils Kok & John M. Quigley, 2010. "Doing Well by Doing Good? Green Office Buildings," American Economic Review, American Economic Association, vol. 100(5), pages 2492-2509, December.
    7. Kahn, Matthew E. & Kok, Nils, 2014. "The capitalization of green labels in the California housing market," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 25-34.
    8. Kee Han Kim & Sang-Sub Jeon & Amina Irakoze & Ki-young Son, 2020. "A Study of the Green Building Benefits in Apartment Buildings According to Real Estate Prices: Case of Non-Capital Areas in South Korea," Sustainability, MDPI, vol. 12(6), pages 1-10, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Armin Jeddi Yeganeh & Andrew Patton McCoy & Steve Hankey, 2019. "Green Affordable Housing: Cost-Benefit Analysis for Zoning Incentives," Sustainability, MDPI, vol. 11(22), pages 1-24, November.
    2. Fuerst, Franz & Gabrieli, Tommaso & McAllister, Patrick, 2017. "A green winner's curse? Investor behavior in the market for eco-certified office buildings," Economic Modelling, Elsevier, vol. 61(C), pages 137-146.
    3. Konstantin A Kholodilin & Andreas Mense & Claus Michelsen, 2017. "The market value of energy efficiency in buildings and the mode of tenure," Urban Studies, Urban Studies Journal Limited, vol. 54(14), pages 3218-3238, November.
    4. Andreas Mense, 2018. "The Value of Energy Efficiency and the Role of Expected Heating Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(3), pages 671-701, November.
    5. Fuerst, Franz & Shimizu, Chihiro, 2016. "Green luxury goods? The economics of eco-labels in the Japanese housing market," Journal of the Japanese and International Economies, Elsevier, vol. 39(C), pages 108-122.
    6. de Ayala, Amaia & Galarraga, Ibon & Spadaro, Joseph V., 2016. "The price of energy efficiency in the Spanish housing market," Energy Policy, Elsevier, vol. 94(C), pages 16-24.
    7. Bertram I. Steininger & Claudia Nadler & Melanie Franke & Carolin Pommeranz, 2018. "Wahrnehmung des Energieausweises in hypothetischen und realen Mietentscheidungen auf dem deutschen Wohnimmobilienmarkt [Perception and Price Effect of Energy Performance Certificates on the German ," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 4(1), pages 29-48, November.
    8. Niina Leskinen & Jussi Vimpari & Seppo Junnila, 2020. "A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties," Sustainability, MDPI, vol. 12(7), pages 1-22, March.
    9. Carolin Pommeranz & Bertram Ingolf Steininger, 2018. "Willingness or Market Power: What Induces Tenants to Pay for Energy Efficient Housing?," ERES eres2018_134, European Real Estate Society (ERES).
    10. Andrea Chegut & Piet Eichholtz & Rogier Holtermans & Juan Palacios, 2020. "Energy Efficiency Information and Valuation Practices in Rental Housing," The Journal of Real Estate Finance and Economics, Springer, vol. 60(1), pages 181-204, February.
    11. Ramos, A. & Gago, A. & Labandeira, X. & Linares, P., 2015. "The role of information for energy efficiency in the residential sector," Energy Economics, Elsevier, vol. 52(S1), pages 17-29.
    12. Ankamah-Yeboah, Isaac & Rehdanz, Katrin, 2014. "Explaining the variation in the value of building energy efficiency certificates: A quantitative meta-analysis," Kiel Working Papers 1949, Kiel Institute for the World Economy (IfW Kiel).
    13. Aydin, Erdal & Brounen, Dirk & Kok, Nils, 2020. "The capitalization of energy efficiency: Evidence from the housing market," Journal of Urban Economics, Elsevier, vol. 117(C).
    14. Paloma Taltavull de La Paz & V. Raul Perez-Sanchez & Raul-Tomas Mora-Garcia & Juan-Carlos Perez-Sanchez, 2019. "Green Premium Evidence from Climatic Areas: A Case in Southern Europe, Alicante (Spain)," Sustainability, MDPI, vol. 11(3), pages 1-29, January.
    15. Zhang, Li & Sun, Cong & Liu, Hongyu & Zheng, Siqi, 2016. "The role of public information in increasing homebuyers' willingness-to-pay for green housing: Evidence from Beijing," Ecological Economics, Elsevier, vol. 129(C), pages 40-49.
    16. Adriano Bisello, 2020. "Assessing Multiple Benefits of Housing Regeneration and Smart City Development: The European Project SINFONIA," Sustainability, MDPI, vol. 12(19), pages 1-28, September.
    17. Yongsheng Jiang & Dong Zhao & Andrew Sanderford & Jing Du, 2018. "Effects of Bank Lending on Urban Housing Prices for Sustainable Development: A Panel Analysis of Chinese Cities," Sustainability, MDPI, vol. 10(3), pages 1-16, February.
    18. Song, Zisheng, 2021. "The capitalization of school quality in rents in the Beijing housing market: A propensity score method," Working Paper Series 21/7, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    19. Eichholtz, Piet & Holtermans, Rogier & Kok, Nils & Yönder, Erkan, 2019. "Environmental performance and the cost of debt: Evidence from commercial mortgages and REIT bonds," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 19-32.
    20. Khazal, Aras & Sønstebø, Ole Jakob, 2020. "Valuation of energy performance certificates in the rental market – Professionals vs. nonprofessionals," Energy Policy, Elsevier, vol. 147(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:15:y:2022:i:1:p:507-:d:1017678. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.