W i l l G r e e n B u i l d i n g s b e A p p r o p r i a t e l y V a l u e d b y t h e M a r k e t ?
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high returns from investment in such funds, compared to regular investment funds.
However, with regard to outcomes, different results have appeared based on differences
in the analysis period, etc. (e.g., Renneboog and Zhang, 2008; Galema et al., 2008).
Even if profitability is not high, should liquidity increase, it is to be expected the discount
rate will decrease via the risk amount decreasing. This being the case, the economic
value would increase through this decrease in the risk amount. However, at the present
time, not enough empirical research exists to indicate this. Furthermore, if the movement
among the likes of the Development Bank of Japan and other private-sector financial
institutions to actively provide low-interest financing for buildings with superior
environmental performance gains momentum, liquidity will increase through the
reduction in direct funding costs and this will be reflected in the value.
In addition, let us assume that during the lifespan of a property, tenants come to avoid
locations other than green buildings due to the implementation of strong environmental
regulations. In this case, it is not simply a matter of the income decreasing.
Given, as can be seen at the present time, investment behavior changes based on
whether the year of construction of an investment property was before or after
regulations regarding earthquake-proof capacity were implemented
the possibility that
properties with poor environmental performance will also be excluded from investment
targets in future cannot be underestimated.
3. Green building and housing price
3.1.Hedonic model and data
Prior to collecting data needed to analyze the impact of green buildings on housing price,
we examine the pricing mechanism for green buildings. The value of a house changes
according to factors such as number of rooms, balcony size, toilet facilities, kitchen and
bathroom facilities, earthquake resistance, and other attributes. In particular, residential
houses are priced in a differentiated market according to performance and functionality
because each is unique (in other words, no other goods are totally equivalent in terms of
location, etc.). The most effective method for analyzing such a market is the hedonic
approach, which considers market value as a group of various performance and
functional values (a group of attributes) and estimates the product price using statistical
regression analysis. The price is expressed by an equation consisting of the attribute
groups, which is known as the “hedonic price function.” Using this function, we can
estimate the amount of value that consumers attach to each type of function and
performance.
This study is intended to compute the economic value of the green features of
environmentally friendly buildings, using the hedonic approach. Specifically, the pricing
mechanism for new condominiums is defined as follows:
,
= � ,
,
,
,
�
(3)
PC
i,j
: Price for condominium unit
j
in new apartment building
i
G
i
: Green label for apartment building
i
X
i,j
: Architectural characteristics of condominium unit
j
in apartment building
i
A
k
: Characteristics of the ambient environment of district
k
C
l
: Locational characteristics of area
l
1
Earthquake-proofing standards were specified in 1981, when revisions to the Building Standards Act were
implemented. As a result, terms such as ``new earthquake-proofing standards'' and ``old earthquake-
proofing standards'' appeared, and buildings built to old earthquake-proofing standards were frequently
discounted as investment targets.
