The Cultural Origin of Green Price Premium
Presentation
Overview
Overview
Description
We analyze whether houses with energy-saving features are sold for higher prices (i.e., the green price premium) and whether the green price premium is driven by economic or social motives. We find a significant green price premium ($22,000+ on average) for houses with green building certification, geothermal heating, solar systems, and/or tankless water heaters, but not for houses with rainwater catchment systems. We further estimate the house-specific net present value of individual green features using hand-collected data, and find that the green price premium cannot be explained by the economic value of the green feature(s). Instead, the green price premium depends on the homebuyers’ cultural origins - homebuyers that are more individualistic and indulgent but less uncertainty avoidant pay a lower price premium for green houses. Our findings point to the social value of green houses and highlight the role of investors’ preferences in understanding the pricing of green assets.
