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Exploring the relationship between the sustainability of construction and market value: Theoretical basics and initial empirical results from the residential property sector

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Purpose ‐ The basic purpose of this paper is to explore the relationship between the sustainability of construction on the one hand and market value, worth and property investment performance on the other hand. This paper aims to analyse price movements and price differences caused by different property characteristics. Design/methodology/approach ‐ Based on the estimated log-linear hedonic regression model, a hedonic price index is calculated. Price movements subject to different property characteristics are examined by constructing various conditional hedonic price indexes. Findings ‐ The results reveal that, high-quality flats or flats within preferred locations clearly outperform their competitors in terms of price stability during an overall market downturn. However, it is also shown that contemporary building descriptions or specifications of transactions within property databases are not yet sufficient and need to be widened to meet forthcoming challenges. Therefore, an "integrated building performance approach" is introduced and a proposal for the step-wise improvement of building descriptions is made. Practical implications ‐ The paper shows that efforts need to be undertaken by the property profession in combining and transferring financial performance data along with information that is indicative of a building's contribution to sustainable development. Originality/value ‐ The paper offers insights into the relationship between the sustainability of construction and market value.
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Keywords: Buildings; Germany; Residential property; Sustainable development

Document Type: Research Article

Publication date: 17 April 2007

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