A new energy rating system penalizes homes for emissions, creating large price gaps between similar properties. This has led to market distortions and calls for better buyer education.
DPE rating system creates price disparities
Since July 2021, the energy performance diagnostic (DPE) in France has used a system where the final rating is based on the worse of two sub-ratings: energy consumption and greenhouse gas emissions. This has led to price differences of 2 to 3.5% between nearly identical homes that fall on either side of a rating boundary.Sub-ratings influence final classification
A study published on The Conversation found that 15% of homes sold with the new DPE received a final rating lower than their energy consumption sub-rating, solely because of greenhouse gas emissions. This is particularly true for homes using gas heating, which may be energy-efficient in kilowatt-hours but still results in a lower overall rating.Buyers focus on final letter
Homebuyers often rely on the final letter (A to G) of the DPE without examining the sub-ratings. This simplification leads to significant price differences between properties with similar characteristics but different ratings, even when the energy consumption difference is minimal.Price differences reflect rating thresholds
Data shows that when greenhouse gas emissions determine the final DPE rating, the average price difference between two houses on either side of a class threshold reaches 2%. At the D to E boundary, the discount increases to 3.5%. For a 300,000 euro property, this can mean a loss of 10,500 euros, despite a small difference in monthly energy costs.Historical context of the change
Before the reform, the greenhouse gas emissions label on the DPE had no detectable effect on property prices, as only primary energy consumption was considered. The new system now incorporates emissions into property valuation, effectively linking climate externalities to real estate prices without direct taxation or subsidies.Sellers analyze DPE details
Informed sellers now examine the details of the DPE before listing their property. A house rated D due to emissions but close to a C rating in energy consumption can be priced higher than one rated D on both criteria. Energy audit services, offered by companies like ENGIE and Hellio, help sellers optimize their property's valuation before selling.Buyers may miss better options
Some buyers may overlook a house that is energy-efficient but penalized by a final D rating in favor of a less efficient house rated C. French electricity, which is largely decarbonized, benefits from an artificial advantage in the rating system. Rational buyers should compare projected bills and renovation costs instead of relying solely on the DPE letter.Regulatory impact on market behavior
The revised DPE system demonstrates how regulatory changes can influence market behavior without requiring direct fiscal measures. However, it remains to be seen whether buyers will learn to interpret sub-ratings or if threshold effects will continue to distort real estate market efficiency. The next few years will determine if this inefficiency is an acceptable cost for addressing climate externalities or a flaw requiring further reform.
