Housing Tenure and Informational Asymmetries

Herman Donner and Fredrik Kopsch

No 16/3, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: The paradigm shift of focus from rental apartments to owner occupied units on the Swedish property market has led to a substantial number of rental apartments being converted to cooperative apartments. Such conversions typically are done at prices far below market value. This provides a setting with strong financial incentives for tenants involved in such a conversion to take advantage of their informational advantage regarding the financial management of a cooperative, as compared to less informed neighbors and buyers on the general market. This setting also provides a reliable way of estimating the persistence and effects of such an informational asymmetry through nearly 200,000 apartment transactions in Stockholm, Sweden during the period of 2005 to mid-2014. We find strong support towards a behavior concurrent with moral hazard; as such insiders mismanage the cooperatives by setting monthly fees artificially low in order to increase the probability of a conversion as well as apartment values. Lastly, market participants seem to discount this informational asymmetry as recently converted apartments sell at lower prices.

Keywords: Informational Asymmetries; Real Estate; Housing Tenure (search for similar items in EconPapers)
JEL-codes: D80 D82 R30 R31 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2016-02-24
New Economics Papers: this item is included in nep-eur and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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