Does size matter? Is there an optimal size for tenant–owner associations?

Abstract

PurposeThe authors investigate how prices of condominiums are affected by the size of the tenant-owner associations that they belong to.Design/methodology/approachThe authors use data of sold apartments in the Swedish municipality Malmö 2013–2018 and estimate hedonic price regressions. The authors also perform semi-structured interviews with three senior professionals in real estate companies.FindingsThe authors find significantly negative relationships between the prices of condominiums and the size of tenant-owner associations. Also, regression results indicate that associations should be no smaller than 6–10 apartments. The interviews support that associations should not be too small or too big. The lower and upper limit was suggested by the respondents to 40–50 and 80–150 apartments, respectively. In these ranges, economies of scale can be achieved, and residents will not lose the sense of community and responsibility.Research limitations/implicationsThe authors do not prove causality. Smaller associations may have relatively exclusive common amenities, about which we lack data. The same relationships may not exist in different market conditions.Originality/valueThe authors are not aware of previous studies with the same research question. The size of tenant-owner associations may affect the price through different channels. First, several of the banks in Sweden do not always grant mortgages for condominiums that belong to small associations. Second, larger associations may have better economies of scale and more efficient property management. Third, homeowners may prefer smaller tenant-owned associations, because they may feel less anonymous and provide more influence on common amenities.