European energy crisis: Did electricity prices shock real estate markets?

This paper investigates how the 2021–2022 European energy crisis, a major macro-financial shock, affected the relative valuation of energy-efficient homes in Norway. Leveraging the country’s electricity market—characterized by five distinct regions with varying exposure to European power prices—we analyze how energy price shocks influence housing market dynamics with a triple difference-in-differences regression framework. We find that home prices fell significantly in regions affected by the shock, with average value losses ranging from 1.2% to 3.6%. Energy-efficient homes experienced smaller price declines, particularly in the single-family home segment, indicating a differential price response during the shock. Moreover, the negative price effects persist despite the introduction of electricity price subsidies. These findings highlight the complex relations among energy costs, real estate market valuations, and housing characteristic heterogeneity by offering generalizable insights into the resilience of housing markets to unanticipated shocks and the role of policy interventions in mitigating their effects.