Deflation isn’t necessarily supposed to affect housing or transportation, but the Japanese media keeps harping on how the prices of condominiums in the major cities are dropping along with the number of housing starts. Obviously, now is the time to buy, though experts always say that if you wait until others start buying in a so-called buyers market, then you’re already too late.
According to a recent article in Shukan Asahi, many condo developers are stuck with inventory that they can’t get rid of, no matter how much they lower the price. Many of these companies are selling their unsold condos to outside agents for as little as 70 percent off. In many cases, these agencies have to sell the units for even less money than what they paid for them, basically “dumping” these units onto the housing market. Needless to say there are many people who may be interested in such cheap housing but finding these units takes more time and effort than a lot of people have.
Still, some are trying. The article uses the example of an editor who bought a small 35-year-old maisonette-style apartment in trendy Kichijoji for only ¥5 million and then spent ¥2 million fixing it up into an “English-style” residence. Usually, the main problem with old condos is that, like old single-family homes, they weren’t necessarily meant to last. After forty years the residents of a condominium may decide to reform their building, but if the zoning laws have changed in the meantime, they may not be able to rebuild it the way they want. Maybe they have to lower the height and thus eliminate some units, or they have to build more units and attract new tenants in order to make the rebuilding costs affordable to all the owners. In any event, buying an old condo, no matter how cheap or what you plan to do with it, can be a risky endeavor; which is why so many people don’t do it.
But old government-built apartments–or “kodan”–are less risky. Those that were built in the 60s and 70s were built to the highest standards of the time, so they are structurally sound, and because many were built on government land outside of city centers, zoning is not a problem. Usually, older kodan are not very tall simply because the government did not install elevators; and they assured that there was lots of land surrounding the structures for use by families, so rebuilding later is not a problem.
The semi-private agency in charge of these apartments has been trying to sell vacant units for years now, and some enterprising people are buying them at rock bottom prices–a million or two for a standard 50-60 square meter unit–and then sinking another two million in improvements. Sometimes they live there themselves, but just as often they sell them for a profit. The ones I’ve seen on TV are really quite nice. If you’re single or a young couple it’s an easy investment to make, and you can sell it a couple of years down the line without having to worry about losing too much of your investment. Who knows, maybe a few years down the line you can even sell it for more. Now wouldn’t that be a change!
Great blog! I’m slowly working my way through it as I am considering purchasing a place in Tokyo in the not too distant future. Thanks for putting everything together like this!
One question: What is the name of the semi-private agency you mentioned above that’s in charge of selling koudan?
It’s UR, but that post was written in 2009, and as far as we know UR has since gotten out of the business of selling condos. All they do now is rental, building management, and land maintenance. Still, if you have an area you like you can ask any local realtor if there are any used koudan condos on the market. Tokyo may be difficult.
Got it! Thanks very much for the reply.