Housing Tenure and Informational Asymmetries
(2016)- 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... (More)
- 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. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/081331d5-41e5-442e-9a38-2fcfd39965de
- author
- Kopsch, Fredrik LU and Donner, Herman
- organization
- publishing date
- 2016
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- Informational Asymmetries, Real Estate, Housing Tenure
- pages
- 23 pages
- language
- English
- LU publication?
- yes
- id
- 081331d5-41e5-442e-9a38-2fcfd39965de
- date added to LUP
- 2018-01-09 16:04:13
- date last changed
- 2018-11-21 21:37:11
@misc{081331d5-41e5-442e-9a38-2fcfd39965de,
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.}},
author = {{Kopsch, Fredrik and Donner, Herman}},
keywords = {{Informational Asymmetries; Real Estate; Housing Tenure}},
language = {{eng}},
note = {{Working Paper}},
title = {{Housing Tenure and Informational Asymmetries}},
year = {{2016}},
}