European Energy Crisis: Did Electricity Prices Shock Real Estate Markets?

Becka Brolinson, William Doerner, Arne Johan Pollestad and Michael Seiler ()

No 24-10, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: This paper investigates the impact of the 2021–2022 European energy crisis, a significant macro-financial shock, on homebuyer willingness-to-pay for energy-efficient homes in Norway. Leveraging the country’s electricity market---characterized by five distinct regions with varying exposure to European power prices---as a quasi-experiment, we analyze how energy price shocks influence housing market dynamics. Applying a triple differences regression framework to real estate transactions, we find that home prices in regions affected by the shock fell significantly relative to unaffected regions, with single-family dwellings outside major cities experiencing the largest declines. While energy-efficient homes appeared less vulnerable, this effect was only marginally significant. Moreover, the negative price effects persisted despite the introduction of electricity price subsidies. These findings highlight the complex relationship between energy costs, housing market valuations, and buyer preferences, offering generalizable insights into the resilience of housing markets to macro-financial shocks and the role of policy interventions in mitigating their effects.

Keywords: energy price shock; housing market; energy efficiency; energy performance certificate; government subsidy; macro-financial shocks (search for similar items in EconPapers)
JEL-codes: D12 G14 H23 L94 P18 Q4 R2 R3 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2024-12
New Economics Papers: this item is included in nep-eec, nep-ene and nep-ure
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