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Housing Tenure and Informational Asymmetries

Author

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  • Donner, Herman

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

  • Kopsch, Fredrik

    (Departement of Technology and Society / Division of Real Estate Science)

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.

Suggested Citation

  • Donner, Herman & Kopsch, Fredrik, 2016. "Housing Tenure and Informational Asymmetries," Working Paper Series 16/3, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2016_003
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    Cited by:

    1. Caesar, Carl & Donner, Herman & Kopsch, Fredrik, 2019. "The impact of leasehold status on apartment price," Journal of Housing Economics, Elsevier, vol. 46(C).

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    More about this item

    Keywords

    Informational Asymmetries; Real Estate; Housing Tenure;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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