Last night on the TV Tokyo news show Business Satellite, there was a report about used condos. The report said that during the first five months of the year 12,000 new condos went on sale of which 70 percent were actually sold. More importantly, 13,000 used condos were sold during this period. Real estate and housing industry people see this as a “trend” toward better sales of used condos.However, such a general statement needs clarification. Industry surveys indicate that about 40 percent of people who want to buy condos want used ones, but not necessarily just because they’re cheaper. One couple interviewed by TV Tokyo said they bought a used condo because they wanted something they could change. One of the problems with new condo sales practices in Japan is that almost always the purchaser has to decide based on a model room. Developers are desperate to sell all the units of a building before construction is completed, but many buyers are wising up: they know that the real thing isn’t necessarily going to be like the model. The couple also said that almost all condominiums have the same boring layouts. There’s no choice. With an old condo, they can hire a remodeling agency to tear out walls and give them the exact layout they want.
This sounds like a good idea, but some of the experts interviewed by TV Tokyo said reform-minded buyers have to be very careful. There have been quite a few cases of people hiring redesign firms who ended up with shoddy work. There are just as many pitfalls in redesigning condos as there are in redesigning single-family houses. And while the national Housing Finance Agency will guarantee loans for used condos that people plan to redesign (the average redesign cost is ¥8 million, which sounds low), they have very strict criteria, meaning you have to bring them lots of structural info beforehand.
There are other reasons why buyers should take the redesign mini-boom with a grain of salt. Realtors are desperate to unload used condos. The inventory is rising dramatically. Average prices in the Tokyo metropolitan area have dropped 0.2 percent since one year ago. The average price of a 70 square meter condo is now about ¥27 million. That doesn’t mean people will pay that much, it’s just the average asking price.