Investigating the green incentives in terms of monetary benefits on residential property during resale

Abstract

Due to urgent global warming concerns and the consequential severe impacts, international efforts such as the Paris Agreement have been initiated. In response, Hong Kong has introduced the Climate Action Plan 2050, with the goal of becoming carbon neutral by 2050. Given that the built environment sector contributes a significant proportion of local carbon emissions, its role in combating the climate crisis is pivotal. Despite the existence of encouraging policies promoting the construction of green buildings, it remains uncertain whether there are monetary green incentives for owners of green-certified residential buildings during resale, notwithstanding the numerous intangible benefits associated with green certification. In response to this gap, this study investigates the influence of green building certification on the appreciation of residential property prices, specifically focusing on BEAM Plus, a prominent green building certification in Hong Kong. It aims to assess the monetary benefits to owners of residential properties with green certification during resale and explore variations in these benefits across properties of different sizes. Employing a hedonic price model for analysis, this study analyses approximately 13,000 resale transactions across seven chosen districts in Hong Kong. The results show a positive influence of green certification on property price appreciation over time, leading to tangible monetary gains. Furthermore, the influence of green certification is more notable with higher certification ratings. Moreover, when properties are categorized into three groups based on size according to Rating and Valuation Department (RVD) classifications, namely Class A (area less than 40m²), Class B (area not less than 40m² and less than 70m2), and Class C-E (area not less than 70m²), the study reveals the most substantial impact of green certification on Class B properties, followed by Class A properties and eventually Class C-E properties. This finding suggests that the relationship between the monetary benefits associated with green certification and property size is non-linear. This research provides significant contributions to multiple stakeholders, including academia, prospective buyers, investors, and policymakers. These contributions include shedding light on the variables impacting the appreciation of residential property prices, inspiring further research efforts, offering additional insights for buyers and investors when making purchasing decisions, and providing guidance for future policymaking regarding green building certifications.