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The impact of leasehold status on apartment price

Caesar, Carl; Donner, Herman and Kopsch, Fredrik LU (2019) In Journal of Housing Economics
Abstract

Based upon cooperative apartments sold in Stockholm, Sweden during the period of 2012 to mid-2014, we find that leasehold status (meaning that the cooperative does not own the land that the apartment building occupies) has a small but statistically significant impact on price of −2.3% when controlling for location and apartment characteristics in a hedonic model. At the time of renegotiation (i.e. a lease duration of 0), leasehold depreciates price with 4.2%. We also apply propensity score matching, which results in slightly larger negative impact on the price being estimated. As current lease payments are covered by monthly fees that are to be paid to the cooperative, a negative effect on price should mostly be attributed to an... (More)

Based upon cooperative apartments sold in Stockholm, Sweden during the period of 2012 to mid-2014, we find that leasehold status (meaning that the cooperative does not own the land that the apartment building occupies) has a small but statistically significant impact on price of −2.3% when controlling for location and apartment characteristics in a hedonic model. At the time of renegotiation (i.e. a lease duration of 0), leasehold depreciates price with 4.2%. We also apply propensity score matching, which results in slightly larger negative impact on the price being estimated. As current lease payments are covered by monthly fees that are to be paid to the cooperative, a negative effect on price should mostly be attributed to an increased uncertainty of future levels of monthly fees. We therefore extend the existing literature by examining the impact on price by the remaining leasehold term whilst still controlling for monthly fees. Consistent with our hypothesis, apartment prices are found to increase with 0.22% for each additional year that remains until renegotiation of the lease contract.

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author
organization
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Contribution to journal
publication status
epub
subject
in
Journal of Housing Economics
publisher
Academic Press
external identifiers
  • scopus:85063946111
ISSN
1051-1377
DOI
10.1016/j.jhe.2019.04.001
language
English
LU publication?
yes
id
1c0c434c-6d4b-4884-a9af-9ef6339466ff
date added to LUP
2019-05-08 14:28:57
date last changed
2019-05-14 04:59:24
@article{1c0c434c-6d4b-4884-a9af-9ef6339466ff,
  abstract     = {<p>Based upon cooperative apartments sold in Stockholm, Sweden during the period of 2012 to mid-2014, we find that leasehold status (meaning that the cooperative does not own the land that the apartment building occupies) has a small but statistically significant impact on price of −2.3% when controlling for location and apartment characteristics in a hedonic model. At the time of renegotiation (i.e. a lease duration of 0), leasehold depreciates price with 4.2%. We also apply propensity score matching, which results in slightly larger negative impact on the price being estimated. As current lease payments are covered by monthly fees that are to be paid to the cooperative, a negative effect on price should mostly be attributed to an increased uncertainty of future levels of monthly fees. We therefore extend the existing literature by examining the impact on price by the remaining leasehold term whilst still controlling for monthly fees. Consistent with our hypothesis, apartment prices are found to increase with 0.22% for each additional year that remains until renegotiation of the lease contract.</p>},
  author       = {Caesar, Carl and Donner, Herman and Kopsch, Fredrik},
  issn         = {1051-1377},
  language     = {eng},
  publisher    = {Academic Press},
  series       = {Journal of Housing Economics},
  title        = {The impact of leasehold status on apartment price},
  url          = {http://dx.doi.org/10.1016/j.jhe.2019.04.001},
  year         = {2019},
}