– There are still major gaps in the ability of households to seek and assimilate information to make rational decisions about the condominium business, says Swedbank’s Private Economist Arturo Arques.
the bank is now in the forefront to raise awareness of how big or small a risk it is to buy in a given compound.
By launching a checklist with a series of questions in conjunction with comparable benchmarks, it is hoped that the bank’s mortgage customers to more easily make the difference between buying in compounds with good and poor finances. Examples of common risk is the trend of increasing debt which in recent years added into compounds with new construction or remodeling.
– Last other day I saw an example where the compound debt was SEK 27 000 per square meter. The accommodation is very interest rate sensitive. It’s about a thousand pieces in the height of the monthly fee is already at 1 percentage point higher interest rates, says Arturo Arques.
Average compound leverage in all its compounds are now about 5 000 per square meter, and the new construction was avoided until a few years since the debt over 12 000 per square meter. But lately seems to latches releasing, with gradually escalating debt levels of certain compounds. The consequence is that higher interest rates will be unpleasant surprise to the uninformed.
Behind Swedbank offensive is also concern about the long-term serious consequences of the euphemistically fiddling with depreciation SvD revealed the winter and spring of 2014.
the compounds had indeed end up with so-called progressive depreciation, which was replaced with “linear depreciation”, but many reports today rather deficits than raise rates somewhat.
– the shortfall excused with the compounds have a so-called “positive cash flow” which in plain language means that the compound is charge fees only cover current expenditure. The annual fees do not cover depreciation and saving for future renovations and maintenance speaks quietly about, warns Arturo Arques.
How is it that Swedbank is the first bank to do a proper checklist?
– For several reasons. I myself have 30 years of experience on the boards of housing associations. In addition, I sit in the Housing Survey where I hear and see from other professional forecasters. Furthermore, Swedbank’s largely lending to housing and that the Bank’s private economist, I see the need, says Arturo Arques.
It is the combination of inflated loans, inadequate association savings and ignorance of the properties’ future needs, as in other interest rates can be an explosive mix in the Swedish housing market. Overall, this according to Arturo Arques get the condominium market to fail.
– Everyone knows that a real estate slit. Elevators, gutters, roofs, trunks, etc. need sooner or later be replaced. This wear should normally be illustrated through the association depreciation and provisions for external fund. What all property owners know is that this wear costs conservatively around 150 crowns per square meter of living space and year. If you look closely in tenant unions statements we see that many associations are far below this level and the risk of substantial future fee increases.
The checklist is considered especially anxious when housing rights are now nearly a million in the country at the same time price levels are very high, as well as household debt.
– You should know that housing prices can go up and down, just like the stock market, says Arques.
Lack of consumer protection in the condominium market is well known since years. The government has appointed a commission, but the proposals expected until next spring.
Here you can download the document
Swedbank’s new list explains how you count forward a series ratios. The checklist also provides “hindsight” what is moderate, high or low values.
The association’s financial condition can be checked at 15 points.
- To know the flat surface and profile shares are of course essential.
- you can then find out the apartment’s share of the association loans.
- in addition, you should calculate the apartment’s share of society’s savings and the share of the association’s results.
- Calculate the operating cost per m2 and the annual fee per m2. The checklist shows what is unusually high or low.
- “How much increases the monthly fee if interest rates rise by one percentage point?” Reads another key issue.
- Other questions: Is the house full value insurance? The Board has liability insurance? Do compound ground? If leasehold, which in renegotiating? Is technical maintenance plan? What is the BR-association value year?