The Swedish tax law that could limit private real estate

Written by Sónia Kösenyiu | CNN

The city is marked by hundreds of sites of interest, from its religious heritage sites to the National Palace and Louis II Mosque. There are also vast stretches of dead plot, in this case a few of the 30,000 cars that have been abandoned at the boulevard, estimated to be worth a total of about 500 million euros ($618 million).

“Just like we used to live in apartments or houses,” says Andreas Blas, research analyst at property research and consultancy firm CBRE , “today we only live in data.”

Information about real estate also plays a pivotal role in the process of urban development and acquisitions. In this era of big data, the sector needs to become more responsive and actively involved in the wider community to continue to gain trust and attract private investment.

New data laws

Against this backdrop, the Swedish Tax Authority recently published a first national regulation on using public data for tax purposes. It stipulates that private companies should only use public data if it is “necessary for these purposes.”

As a result, a number of real estate agents, analysts and developers fear that the regulation will slow down efforts to make space for new projects.

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“What we need, and what we are looking for, is for government and researchers to keep developing new technologies that allow for better data analysis,” says Kim Hickel-Söndqvist, CEO of the FundInvest Swedish Real Estate Fund , which invests in real estate in developing countries.

“We still need to do public services and information gathering,” he says. “But without public data, it is very difficult to understand where a data-driven real estate investment strategy is the most profitable for clients.”

The stakes are high. By the end of the decade, apartment vacancies in urban China will reach 8.4% on average, according to PwC , the world’s largest business advisory firm, representing a potential 4.8 billion-euro ($5.6 billion) investment loss in the sector.

The problem, according to Blas, is that data analysis is a specialized field, involving “tremendous financial resources” — a challenge shared by many companies working on real estate.

“We can invest in private data today; we can also invest in Facebook data.”

“As a software service company,” adds Hickel-Söndqvist, “Data is key to development and investment decision-making in the space, as we want to see how our investments will develop. It is a continuous innovation process.”

Blas agrees, saying: “We try to make sure that we have a complete picture of the real estate industry today and that we are using all the data available to us.”

How big data affects the economy

Several real estate firms are already using big data. A New York real estate consulting firm, Parsimondo , is tapping into online messaging services to find properties that its clients are interested in.

Parsimondo projects that by 2025, more than 75% of real estate investment decisions will be made online. According to Parsimondo, a recent survey showed that the firms where information is at the top of their internal rankings tend to see an increase in gross rent, tenant retention and the performance of their portfolios.

This is not the first time that real estate firms have used private data for investment, but it may be the first time that clients are receiving instant results. Parsimondo CEO Margalit Dragg praised the Swedish regulation for putting the onus on the private real estate industry.

“The tax authority has clearly shown that even their property market is beyond their control,” he says. “This regulation helps stop this behavior, whereas in other countries the private real estate market has to interact with the state.

“This represents a major risk for the entire data industry.”

Hickel-Söndqvist agreed, saying: “We need to be innovative to attract entrepreneurs and to seek new business opportunities in the commercial real estate space.”

The potential for new services is there. Parsimondo is currently working on new ways of responding to unqualified tenants looking for space through phone apps and virtual Skype conversations. And Hickel-Söndqvist, who is studying the rules of using public data, is also thinking about the use of Facebook data.

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