The influence of housing location on energy ratings price premium in Alicante, Spain

Abstract

Location is, along with other aspects, one of the most important characteristics when determining the sale or rental price of a residential property. Energy rating is one of the characteristics involved in determining the rent or sale price of a house. Past research has shown the importance of this attribute in numerous studies. Moreover, these studies have found mixed results regarding the magnitude, direction, and statistical significance of energy rating price premiums. This research aims to determine whether housing location influences energy rating price premium. To achieve this objective, a least squares regression model and a multilevel model were estimated using a sample of 70,170 different residences that were offered for sale in the province of Alicante. The multilevel models show that, once the differences due to the location (comarca) had been eliminated, the energy rating label itself had an effect on the asking price and also that there was an effect for the relationship of the energy rating with the location characteristics (comarca). On the other hand, the variables that defined the energy ratings were not those responsible for the differences between the average asking prices of the residences in the comarcas.