Different grades and different green premiums: a cross sectional analysis of a green certification scheme

Green certification is often hailed as an effective means of resolving information asymmetry by providing prospective buyers with credible proof of a property's level of quantitative sustainability performance. These certification schemes are also considered as providing the credible identification labels needed to generate a market premium. This study analysed whether different market premiums (financial implications) exist across different ratings of the HK-BEAM certification scheme. The paper used hedonic price model (HPM) to evaluate the influence of green certification rating levels on residential property prices in Hong Kong. The results indicate, on average, that HK-BEAM certification increases price values by between 5.3% and 6.7%. Most importantly, the results indicate that significant price premium differences exist across the different ratings available for HK-BEAM certified buildings. The findings provide strong proof of the existence of a premium across ratings.

Automated summary

Green certification is seen as an effective solution to information asymmetry, providing credible evidence of a property's sustainability performance and leading to market premiums. This study showed that different ratings of the HK-BEAM certification scheme have a significant impact on property prices, indicating the existence of premium differences across ratings.