Energy price shocks and the demand for energy-efficient housing: evidence from Russia's invasion of Ukraine

Abstract

This paper examines how the energy price shock post Russia's invasion of Ukraine in 2022 affected property transactions. Using administrative data on transaction price and energy efficiency in the UK, we explore if buyers adjust behaviour in response to greater energy costs. Using hedonic difference-in-differences models, we find that prices increase by £1000 for high-rated energy efficiency properties and decrease by £2400 for low-rated ones. Properties with higher potential energy efficiency also see value upticks. We also find that high gas-consuming neighbourhoods experience fewer house sales post-invasion. The size of the effect is explained by buyers perceiving the energy price hike as temporary. Our results shed light on the interplay between energy prices and the property market, offering insights into buyer behaviour and the valuation of energy efficiency.