Leasehold status and apartment prices: exploring price efficiency and optimal choices among housing cooperatives

Purpose This study investigates how leasehold status affects cooperative apartment prices at the neighborhood level in Stockholm and whether housing cooperatives acted rationally when offered to purchase their leasehold land in 2022. Design/methodology/approach The analysis is based on more than 20,000 cooperative apartment sales in Stockholm during 2021. Price effects of leasehold status are estimated at both citywide and neighborhood levels while also controlling for the impact of remaining lease duration. In addition, counterfactual apartment values are calculated under scenarios where cooperatives purchase their land. Findings Leasehold apartments sell at an average discount of 3.6% in central Stockholm and 6.8% in suburban areas, with neighborhood-level effects ranging from negligible to over 15%. This heterogeneity reflects the importance of local market conditions. A potential explanation for the smaller units in the city center is that leasehold tenure is more common, and substitutes in the form of freehold apartments are less available. The counterfactual analysis shows that land purchases were typically unprofitable for cooperatives, even under the City of Stockholm’s discounted terms. Originality/value The study contributes by highlighting the heterogeneity of leasehold capitalization within a single metropolitan area and by extending the analysis beyond buyer valuation to the cooperative’s perspective on land acquisition. The findings suggest that the City of Stockholm likely mispriced leasehold land, raising questions about the efficiency of current pricing and policy frameworks.