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The Effects of Multiple Green Factors on Condominium Prices

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Abstract

This paper analyzes the transaction prices of green buildings assessed on the basis of multiple green factors. Our theoretical model demonstrates that the initial green premium can be negative but becomes positive as the building ages if a green building has a higher life-cycle cost and a longer economic life. Our empirical analysis of green condominiums in Tokyo confirms this prediction. We additionally find that the longer-life design is associated with a price premium, but the use of renewable energy and recycled materials and water is associated with price discounts. The price discounts are interpreted as the capitalization of a greater life-cycle user cost.

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Notes

  1. For example, see Architectural Institute of Japan (2000).

  2. Comprehensive measures are also adopted by other major green labels, such as the Comprehensive Assessment System for Building Environmental Efficiency (CASBEE) in Japan and the BRE Environmental Assessment Method (BREEAM) in the UK.

  3. The life-cycle cost estimate is provided by Komatsu (2010). The average life is provided by the National Infrastructure Council of Japan, January 2008.

  4. Ordinance No. 215 is formally named “Tomin no Kenko to Anzen wo Kakuho Suru Kankyo ni Kansuru Jourei.” For more information, see http://www2.kankyo.metro.tokyo.jp/sgw/English/.

  5. In this paper, we report exp(b + 0.5σ 2) − 1 as the percentage difference when we interpret the coefficient b on the dummy variables with standard error σ (Van Garderen and Shah 2002).

  6. Japan Housing Finance Agency, 2009. A Survey on Attitudes Toward Housing. http://www.jhf.go.jp/files/100014048.pdf

  7. For example, Matsushita et al. (2006) report higher life-cycle costs and inferior strength and durability of recycled aggregate in concrete.

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Acknowledgments

We thank John Quigley, Piet Eichholtz, Nils Kok, Austin Jaffe, Brent Ambrose, Ed Coulson, Joshua Graff-Zivin, Jenny Schuetz, Kerry Vandell, Patrick McAllister, Erin Mansur, James Conklin, Moussa Diop, Sun Young Park, and the participants of seminars at the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT); the AREUEA Denver conference; the Berkeley-Maastricht Conference on Green Buildings; and 2013 NBER Japan Meeting for their comments. We also thank the members of the Tokyo Association of Real Estate Appraisers for their valuable comments and support in configuring the data. We gratefully acknowledge the grants from MLIT and the Institute for Real Estate Studies at the Pennsylvania State University that have supported this research.

Author information

Authors and Affiliations

  1. The Pennsylvania State University, 368 Business Building, University Park, PA, 16802, USA

    Jiro Yoshida

  2. Tokyo Association of Real Estate Appraisers, 1-1 Ichigaya Motomura-Cho, Shinjuku, Tokyo, 162-0845, Japan

    Ayako Sugiura

Authors
  1. Jiro Yoshida
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  2. Ayako Sugiura
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Corresponding author

Correspondence to Jiro Yoshida.

Appendixes

Appendixes

Appendix 1: Green Factors in the Tokyo Green Building Program

Energy Efficiency

  1. (1)

    Reduction of thermal loads

    Sun shaded windows and the insulation of walls, roofs, floors, windows, etc.

  2. (2)

    Use of renewable energy

    Using natural light, photovoltaic power generation, wind power generation, solar heating systems, other renewable energies, etc.

Resource Efficiency

  1. (3)

    Use of eco-friendly materials

    Using recycled aggregates in concrete, blended cement (e.g., blast-furnace slag coarse cement), recycled steel, and other recycled building materials.

  2. (4)

    Water recycling

    Recycling rain and wastewater through on-site sewage treatment; using rainfall infiltration.

Long Life Span of Buildings

  1. (5)

    Long-life design of the building

    Flexible structure enabling easy maintenance, renovation, and conversion (e.g., skeleton-infill separation, modular configuration of plumbing, beams, floor height, etc.) and physical durability (e.g., quality of cement, thickness of reinforced concrete, and exterior material)

Planting

  1. (6)

    Planting

    A larger area of planting; planting on the wall and roof of the building; optimal mix of shrubs and trees; coordination with surrounding green areas; attention to the local eco-system.

Appendix 2

Table 6 Cross-correlations of key variables (Propensity-score matched sample)
Full size table

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Yoshida, J., Sugiura, A. The Effects of Multiple Green Factors on Condominium Prices. J Real Estate Finan Econ 50, 412–437 (2015). https://doi.org/10.1007/s11146-014-9462-3

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