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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How much transaction prices were different from asking prices was estimated using
a dummy variable that identifies transaction samples and a cross term for transaction
price and environmental performance dummies. In other words, we estimated both the
general difference in transaction price level and the difference in transaction price due to
the difference in green rating.
The constant dummy for the transaction price was estimated at -0.051, which is
statistically significant at one percent. This shows that actual transactions were
concluded at prices around 5.1 percent lower than the asking prices. The cross term for
transaction price and environmental performance dummies was estimated at -0.008,
which is statistically on the order of 14 percent. It should be noted, however, that
because transaction prices were available for only 373 of the condominium units with
green labels, the statistical power is limited and the effects of green labels, if any, would
hardly be significant. Further verification needs to be performed by checking robustness
and using a sophisticated standard error estimation method. These estimation results
are interpreted as follows. For condominium units with green labels, the gap between the
asking and transaction prices was 0.8 percentage points larger, standing at 5.9 percent,
but because a 4.7 percent premium was included in the asking price, the final
transaction price was 3.9 percent (4.7 percent minus 0.8 percent) higher than that for
condominium units without green labels. In other words, the effect of green labels was
observed in the transaction price too.
Then, Model 2 was analyzed to measure the time effect. In 2005, the time effect
was a negligible -0.9 percent for the asking price because the program just started in
October the same year. This figure should be interpreted as showing zero effect, rather
than a negative effect. In 2006 and 2007, however, offer prices included premiums of 5.3
percent and 5.6 percent, respectively, and in 2008, a slightly lower premium of 4.8
percent was included.
Estimates for transaction samples cannot be statistically significant because they
were limited in number and allocated to each year of transaction, making the number of
samples for each transaction year even smaller. In particular, there were only eight
transactions for 2005, so the estimation results are not conclusive. For 2006 and 2007,
the estimation results do not show that the difference between asking and transaction
prices was affected by green labels; transaction prices were 5.3 to 5.6 percent higher for
condominium units with green labels than for those without. In 2008, the price discount
for condominium units with green labels was 3.6 percent greater, so the premium
included in transaction prices was around 1.2 percent (4.8 percent minus 3.6 percent).
The estimates for 2008 were shown to be statistically significant, although the number of
transaction samples was as low as approximately 100.
4. Conclusion: A low-carbon society and the real estate market
Real estate can be viewed as an element of production for enterprises and a basis of
living for households; for both parties, it is an indispensable resource. The real estate
market should therefore play an active role in worldwide efforts to realize a low-carbon
society. In this context, it can easily be seen that expectations for green buildings will
only increase over time.
As discussed above, however, even green buildings do not have a positive impact
on the environment; they continuously produce negative externality in the sense that
they discharge carbon compounds. Since green buildings have such features, people
who own, use, and invest in them must try to reduce their negative externality as much
as possible. This does not just mean externality in the sense of the environment, but
includes issues such as respect for landscapes and communities.
Economics textbooks teach that the absorption of negative externalities and
convergence toward a socially optimum supply level can be achieved by imposing taxes
