Green Premium, Brown Discount, Energy Efficiency and Future House Prices: The Case for Retrofit Investment Today

Retrofitting houses for energy efficiency has become a key priority in government policies, including in the UK. Sustainability improvements can increase property values, which are coined as “Green Premiums”. This is the “Brown Discount”, when low energy-efficient properties are sold below the general price. The existence and dynamics of green premiums or brown discounts are contextual and uncertain. This study has projected potential scenarios in the year 2050, together with expected house prices. The estimation has been conducted separately for the UK nations: England, Wales, Scotland and Northern Ireland. Further, the housing stock was evaluated under four categories: terraced, semi-detached, detached and flats. The green premiums were discounted back to the year 2025 for present value. First, the findings revealed that there is a strong case for retrofitting houses today under the illustrated scenarios in 2050. Secondly, if the house is not retrofitted, it will be sold at a brown discount in 2050 in our assumed scenarios. Thirdly, the energy bill savings, better health, comfort, and well-being due to retrofitting have not been considered in this analysis. They are highly significant justifications for retrofitting houses. The limitations of the study lie with the estimations and assumptions of the data, where the green premium and other commodity statistics can be highly sensitive to a range of socio-economic factors. The full paper provides all the information related to limitations, scope, and assumptions of the analysis.