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The current literature has not investigated the perceived value of energy efficiency by households, regardless of financial benefits. Furthermore, there is a severe lack of research that investigates the effectiveness of the current format of EPC-labels. Therefore, the purpose of this paper is twofold: to study how households value energy efficiency in the housing market, regardless of price effects.

This study uses multiple hedonic regression models to analyse 706,778 Flemish properties for sale or rent between 2019 and 2023. The data is provided by Immoweb – the largest online real estate platform in Belgium. Given that the selling market is driven by different mechanisms than the rental market, the data set was divided in sold (522,164 listings) and rented properties (184,614 listings).

The ambiguous results of the A-label in the selling market indicate that the “class evaluation effect” found in related markets which use labels (e.g. household appliances) is also present in the housing market. However, the results of the other (lower) labels clearly show that owners do value energy improvements within labels, and this effect becomes stronger as the EPC-label becomes better. The rental market shows the opposite results. Energy improvements are only valued if they translate into a financial benefit. Taking these findings into account, the second part of this research shows that rescaling the EPC-label creates an incentive for improvements within labels.

This paper provides novel insights by studying the perceived value of energy efficiency in the absence of financial benefits and critically studying the effectiveness of the EPC-labels in their current shape. By investigating both the sales and rental market, the authors are able to make a comparison which creates valuable insights for academia, governments and real estate professionals.

The current literature on energy certificates shows that Energy Performance Certificate labels have an important effect on real estate prices. However, interestingly, the limited studies that address the rental market find significantly lower price premiums than the sales market. The purpose of this paper is to add to this literature, by doing a comparative analysis of price premiums in the sales and rental market in Flanders (Belgium).

This study uses a hedonic regression model to analyze 177,670 real estate listings between 2016 and 2021. The data is provided by Immoweb – the largest online real estate platform in Belgium. The data set was divided in sold and rented properties: the authors evaluated 126,217 sales listings and 51,453 rent listings.

The results confirm that energy efficient properties generate a price premium, but that this premium is significantly larger in the sales market than in the rental market. In addition, the findings indicate that both investors and landlords could benefit strongly from renovating dwellings – especially when renovating from an F label to an A label.

Previous research focuses strongly on the sales market, although in many countries the rental market is similar in size and responsible from much energy consumption. Interestingly, the few studies that are addressing the rental market, find singificantly smaller price premiums than in the sales market. The findings add to this literature tradition and offer a comparative analysis of price premiums in the sales and rental market in Flanders. This allows us to not only show the similarities between both markets but also highlight the differences – creating valuable insights for academia, governments and real estate professionals.