A ticking bomb? Leverage in Swedish Housing cooperatives. A study of consumer inattention toward important financing parameters hidden in the BRF

Sammanfattning: With interest rates on record low levels, concerns about increasing debt levels of home-buyers and BRFs have been raised in media and by Finansinspektionen. This paper examines whether Swedish home-buyers properly value the present value of future cash flows associated with the fee and the debt-level associated with the BRF. Further, the study aims to see if there is a difference in valuation based on the salience of these figures, as fee is included in the realtor's ad while debt-level is not. Through the use of a hedonic pricing model, homebuyers' valuation of different characteristics is investigated and quantified. Data covering c.150,000 apartment transactions between September 2012 and April 2018 was provided by Booli and is used to construct the model. The study finds that both the capitalized fee and the BRF debt-level are priced too low by home-buyers at only 55% and 32% of its fair value, respectively. These results highlight the importance of increasing the awareness of home-buyers towards the financial health of the BRF when buying an apartment.