Evolving Green Premiums: The Impact of Energy Efficiency on London Housing Prices over Time

As climate policy and energy costs increasingly influence housing markets, understanding how energy efficiency is capitalized into home prices has become a critical question for both researchers and policymakers. While prior studies confirm the existence of a green premium—the price advantage of more energy-efficient homes—less is known about how this premium evolves over time in response to shifting regulations, awareness, and market conditions. This study provides new empirical evidence on the dynamic valuation of energy efficiency in the London housing market between 2013 and 2021. Using a repeat-sales framework, we isolate within-property price changes and examine how energy performance is capitalized over time. We find that the green premium associated with higher current energy efficiency strengthened steadily, rising from statistically insignificant levels in 2013 to approximately 0.47% per Energy Performance Certificate (EPC) point by 2021. Meanwhile, the price penalty for a large efficiency gap, reflecting unrealized upgrade potential, narrowed substantially in 2020 and 2021, indicating a marked reduction in buyers’ aversion to less efficient homes. This study adds a new dimension to the green premium literature. It provides empirical evidence that the relationship between energy efficiency and housing value is not static, but responsive to regulatory, economic, and social changes. By tracking year-by-year changes in London, our analysis offers insight into how quickly market preferences adjust and how interventions like minimum efficiency standards translate into property values. This enriched understanding moves the field beyond the question of whether a green premium exists, to how and why it evolves.