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Housing Tenure and Informational Asymmetries

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  • Herman Donner
  • Fredrik Kopsch

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 are typically done at prices below market value. This provides strong financial incentives for tenants involved in such a conversion to use their informational advantage regarding the financial management of a cooperative, 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 through mid-2014. We find that insiders take advantage of an informational asymmetry as newly formed cooperatives set monthly fees artificially low to increase the probability of a conversion as well as apartment values. However, market participants seem to discount this informational asymmetry as recently converted apartments sell at lower prices.

Suggested Citation

  • Herman Donner & Fredrik Kopsch, 2018. "Housing Tenure and Informational Asymmetries," Journal of Real Estate Research, Taylor & Francis Journals, vol. 40(2), pages 155-178, April.
    • Handle: RePEc:taf:rjerxx:v:40:y:2018:i:2:p:155-178
    DOI: 10.1080/10835547.2018.12091496
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