The price premium for green-labelled housing: Evidence from China

Abstract

The Chinese central government introduced the ‘Chinese Green Building Label’ in 2008, which makes China one of the few developing countries with an official rating system of buildings’ performance in sustainability. This paper investigates the existence and magnitude of the price premium associated with this official green label in the residential sector. Based on a unique data set of green-labelled, newly built housing projects and their non-labelled counterparts from around the country in 2013, an empirical analysis suggests that the labelled housing projects attract a price premium of 6.9% compared with their non-labelled counterparts. Further analysis suggests that this official green label is more effective as a reliable signal of buildings’ energy efficiency in the Chinese context compared with developers’ self-advertised ‘greenness’. These results provide preliminary evidence that with this official rating system, the investment in buildings’ energy-efficiency could be potentially profitable for housing developers in China, and such profitability may herald a rapid development of the green housing market in urban China.