Old condos finally attract interest

December 15th, 2009 by Philip Brasor & Masako Tsubuku

Blues skies in store for used condo buyers?

Blues skies in store for used condo buyers?

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 it’s being reported that it’s time to buy, then it’s already too late.

According to a recent article in Shukan Asahi, 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 much as 30 percent less. In some cases, these agencies have to sell the units for even less 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 they have. There seems to be no one place where this information is available.

What’s finally attracting more interest is older condos that are available dirt cheap. 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.

Buying an old condo, even in a buyers market, no matter how cheap or what you plan to do with it, can be a risky endeavor. Like old single-family homes, they weren’t necessarily meant to last. After 40 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. They might 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. It’s too much trouble, so people tend to buy new condos.

But old government-built apartments, colloquially called danchi or kodan, are less risky. Those from 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 danchi are not very tall simply because the government did not want to install elevators, which are expensive to maintain; and they made sure there was lots of land surrounding the structures for use by families, so rebuilding later is much easier.

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 sq. 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. For singles or young couples it’s an easy investment, and they can sell the units a couple of years down the line without having to worry about losing too much of their investment.

Who knows? Maybe they can even sell them for more.

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