Housing market segmentation and the price effect of certified green residential properties

Abstract

One important yet overlooked theme in the literature regarding green building certifications (GBC) is the latent differences in pricing behaviors among property buyers in different housing market segments. Specifically, are buyers in the mass housing market willing to pay larger premiums (in terms of the % above average prices) for properties in certified buildings than buyers in the luxury market? This question is particularly crucial for high-rise environments in which properties belonging to different housing sub-markets are within the same building. This, in turn, could have profound implications for the availability of housing flats of varying sizes in certified green residential buildings. This study, therefore, explores this issue by comparing price premiums, if any, for living space in buildings certified with several green building certifications in the two housing sub-markets in Hong Kong. Utilizing a sample of over 220,000 transactions, the main finding is that buyers in the mass housing market were generally willing to pay larger price premiums for properties in certified buildings than buyers in the luxury housing market, unless the certification represented noticeable and actual (not simulated) improvements in the overall environmental performance or energy performance. Implications for different stakeholders are then discussed based on the findings.