Green signals: Energy efficiency and German housing markets

In this study, we analyze the effect of energy performance certificates on sales prices and rents on the basis of millions of sales and rental listings in Germany in order to understand the causes of the stagnation of the refurbishment rate in the German housing stock. The results show that higher energy efficiency is reflected in higher prices and rents. Sales and rent premiums for energy-efficient buildings are higher when using the so-called Bedarfsausweis (energy demand certificate), which is based on an expert evaluation of the property's energy status. However, these premiums are noticeably lower when using the so-called Verbrauchsausweis (energy consumption certificate), which relies on the meter readings from the past three years. The rent premium for energy efficient dwellings can be fully explained by the energy cost savings when switching from low to high energy efficiency using the Bedarfsausweis. This suggests that when accurate information is available, market participants correctly internalize energy cost savings. Comparing the sale price premium with refurbishment costs suggests that refurbishment is financially viable, but only if the Bedarfsausweis is used. Despite mandatory energy performance certificates, a significant portion of property listings do not provide this information, suggesting the need for stricter enforcement. Policy recommendations: Strengthen the quality of energy performance certificates by focusing on the Bedarfsausweis and phasing out the Verbrauchsausweis. In addition, strengthen compliance with reporting requirements for energy performance certificates by introducing a sanction mechanism. This will increase transparency and can therefore contribute to an increase in the refurbishment rate.