Tokyo real estate

First-timers

Posted on by catforehead

In real estate parlance, there is a term for people who are buying a home for the first time: ichiji shutokusha. In fact, there are homes that are specially designated for these buyers. Almost all are condominiums, and to qualify for the ichiji shutokusha designation they have to have at least 60 square meters of floor area and cost less than ¥35 million. To put it succinctly, they are designed for families and are cheap.

According to the Asahi Shimbun, in 2010 80,204 brand new condominiums designated for ichiji shotuksha were put on sale in the Tokyo metropolitan area. That’s a little more than 18 percent of all the new condos that went on sale in the area that year and a little more than one percent less than the number put on sale in 2009. In fact, the share of new first-time condos among all new condos in Tokyo and its environs has been dropping since the turn of the millennium. In 2001, they accounted for 38 percent of all new condos, and for the next five years the share remained in the 30 percentile range. In 2007, the share dropped to about 25 percent and has been steadily dropping ever since.

The Asahi article doesn’t analyze why this is happening, though one could get a fairly good idea of why such condominiums would become less popular. The above-mentioned criteria would exclude the vast majority of new condos built within Tokyo proper, which is where most people in the region work. The majority of first-time condos are probably located in the far suburbs on inconvenient train lines, which means that their value depreciates even more quickly than condos in Tokyo or other major cities. They are also more difficult to sell, thus contradicting one of the salient features of a first home–it’s appeal as an investment, as a stepping stone to a larger house down the line. The standard middle class narrative says you buy a first house young and then trade up to something better and larger as your family grows. But if the value of your property shrinks over time, that sort of upward mobility is difficult to achieve, since you’re not going to get as much money as you paid for it; and the longer you hold on to the property, the less it’s worth and the less likely you can use the sale money to buy a “better” place. At least with a detached home, the land value may at least stay the same, but there is very little land value involved in condo sales. And since developers are always building new first-time condos that are more appealing than used ones, it becomes almost a self-fulfilling prophecy.

The farther Japan gets from the bubble period of the late 1980s–the last time when condo owners believed the value of their homes would increase–the more likely first-time condo buyers will opt for something that they think they can live in their whole lives, and that doesn’t necessarily include condos designated for ichiji shutokusha. Or, at least, that’s our analysis.

Now on sale

Posted on by catforehead

It’s fairly well-known that Japanese people like new things, and if their budget allows they prefer buying a brand new house or condo rather than one that’s already been lived in. Half of the almost six million condominiums in Japan were built within the last 15 years, and reportedly the pace of construction is slowing due to the ongoing recession. According to statistics recently released by Reins Tower (East Japan Real Estate), sales of older condos also went down over the past year. Sales contracts were concluded for 1,943 used condos in August in the Tokyo Metropolitan area. That’s a 6 percent drop from the same month last year. However, the 920 sales in Tokyo alone represented a 0.9 percent increase over last year. The suburbs were a bit different, with Chiba seeing a 6.8 percent drop and Kanagawa a whopping 14.1 percent decline.

But that isn’t the whole story. While sales on the whole have gone down slightly, the average prices of the condos sold have gone up, as much as 4.6 percent in Saitama, for instance. What this would seem to indicate is that more newer used condos are being sold, since condominiums lose their value with time on a pretty consistent basis. In Tokyo, the trend is more localized. Sales of used condos in the three central wards (Chiyoda, Chuo, Minato) decreased by 15.4 percent, while those in the eastern portion of the city increased by 8.6 percent. Condos in the center of the capital are, of course, much more expensive that those in the eastern part, even though prices in central Tokyo have dropped 6 percent while those in eastern Tokyo declined only 1.4 percent (for comparison’s sake, prices in the western wards dropped the most, 8.2 percent, while those in the southwest–Meguro, Shinagawa, Ota–lost only 0.6 percent).

All indications point to a buyers market for used condos, which is hardly surprising. The stock is increasing. For the entire Tokyo metropolitan area, the available stock of used condos is 52 percent higher than it was last year, and in central Tokyo it’s gone up by 25 percent (all Tokyo by 35 percent). What this means is that it’s becoming more difficult to sell older condos, even in those areas like central Tokyo where it used to be considered easy to do so.