Record Surge in Housing Cooperative Bankruptcies Raises Red Flags for Buyers
Sweden faces a surge in housing cooperative bankruptcies, prompting warnings for prospective buyers.
Key Points
- • 117 housing cooperatives went bankrupt in 2024, nearly triple the amount from 2023.
- • The increase is largely due to rising interest rates affecting financial stability.
- • Prospective buyers should check debt levels and whether land is owned or leased.
- • Small cooperatives may struggle with costs and securing loans.
In Sweden, a staggering 117 housing cooperatives declared bankruptcy in 2024, nearly tripling the previous year's count of 40, according to the Swedish Housing Cooperative Center (SBC). This rise marks the highest number of bankruptcies in a decade and is largely attributed to escalating interest rates that have severely impacted financial stability in the sector. Therese af Jochnick, a business area manager at SBC, emphasized the vital need for prospective homebuyers to be aware of the potential financial pitfalls, warning, "If a cooperative cannot meet its debt obligations, a bankruptcy administrator will take over, potentially converting condominiums into rental apartments and causing owners to lose their entire investment."
Prospective buyers are advised to thoroughly investigate several critical financial indicators. Key among them are debt levels per square meter; newly formed cooperatives often carry high debts that could lead to significant fee increases if interest rates continue to climb. Jochnick pointed out that many cooperatives are exhausting their reserve funds, which should typically be maintained according to maintenance plans costing an estimated 300-400 SEK per square meter annually.
Another significant aspect for buyers to consider is whether the cooperative owns the land or has it under a leasehold arrangement. Leasehold fees have surged, particularly in metropolitan areas like Stockholm, and this could lead to rising member fees that pressure household budgets. Smaller cooperatives face unique challenges as well; distributing costs among fewer households can lead to higher individual financial obligations, and they may have greater difficulty securing loans.
Jochnick suggested that consolidating with neighboring cooperatives could help achieve economies of scale, ultimately enhancing financial viability. Given these turbulent conditions, the rising number of bankruptcies serves as a cautionary tale for potential homebuyers navigating the current Swedish housing market. As the situation evolves, homebuyers are urged to remain vigilant and informed about the financial health of the cooperatives they consider joining.