One of the most important aspects when buying an apartment in Japan is negotiating on the price. Am I getting the property at the right price? What is a reasonable discount to ask for? Do Japanese even negotiate on prices? These are all questions that may cross the minds of foreign buyers.
This is also an important point to consider when it comes time to selling your property. While you may have negotiated down the price when you purchased your home, you should also assume that you may have to accept a discount if you decide to sell your property in the future.
The data below is just a general guide and is based on averages. I have personally seen discounts up to 50% on some apartments when the market is suffering. In some cases, the listing price is kept high by the seller to save face while they may readily accept a steep discount behind the scenes. The discount will really depend on the current conditions of the market (eg. is it a sellers market or a buyers market), the scarcity of the property and the confidence of the seller. In 2014, properties in popular buildings are selling with discounts of below 5% and in many cases at full asking price due to a spike in demand and a shortage of supply.
5 ~ 9% discounts if sold within 3 months of listing
Tokyo Kantei have compiled data on the average difference between the listing price and sale price of secondhand apartments, as well as the average length of time before a property is sold.
As seen from the graph below, the longer the property is listed for sale, the bigger the discount achieved by the buyer.
The average discount on an apartment listed for less than 1 month was 3.77%, but 27.9% of properties sold within a month are sold at full price without any discount. Approximately 70% of properties sold are sold at this stage are sold at an average of 5% below asking price. Only 1% of properties are sold within the first month go for 20% below asking price.
Between 1 ~ 2 months, the discount was 6.73%, and between 2 ~ 3 months it was 8.90%.
The average discount within 3 months, which is also the typical term of an exclusive listing agreement, was 5.13%.
As a general rule, sellers should anticipate a selling price of roughly 5% below listing price if they want a fairly good chance of selling within 3 months of listing. If they are willing to accept a price up to 9% below asking, then they stand an even better chance of making a sale. For an apartment with a listing price of 30,000,000 Yen, they should expect it to sell for around 27,330,000 ~ 28,460,000 Yen (5.13 ~ 8.90% discount). This, of course, is just just based on collated data and is not applicable in every scenario.
After 12 months on the market
The average discount of a listing sold between 5 ~ 6 months after listing was 14.34%. Between 11 ~ 12 months after listing, the average discount was 19.52%. Approximately 48.9% of the properties listed for 12 months are sold with a discount exceeding 20%.
Obviously it becomes necessary to drastically reduce the price in order to make a sale when the property has been listed for several months.
Discounts lower on properties close to train stations in Tokyo
The average discount on properties in greater Tokyo over the past 10 years was 7.58%, and the average time between listing and sale was 2.43 months.
In the Kinki region (Osaka, Hyogo, Kyoto, Nara, Shiga, Wakayama), the average discount over the same period was 8.24%, and the average time from listing to sale was 2.18 months. In Chubu (Aichi, Gifu, Mie, Shizuoka), the average discount was 8.56%, and the average time from listing to sale was 2.68 months.
For properties in greater Tokyo, the distance to the nearest train station was a deciding factor in the discount achieved, while in Chubu it was less obvious.
In greater Tokyo, the average discount on an apartment within a 10 minute walk from a station was 7.53%. If the property was over 11 minutes by bus from the nearest station, the average discount was 9.01%. In Chubu, the average discount was 8.21% for a 10 minute walk or less, and 8.34% for a 11 minute+ bus ride. This is due partly to the fact that many households in Chubu own a car and rely less on walking to the nearest train station.
Apartments over 30 years old
The difference between the discounts on older apartments over 30 years old and newer ones in greater Tokyo was not noticeable. The reason may be due to the appropriate pricing of apartments based on age. In Chubu and Kinki, however, the difference was more noticeable on apartments over 25 years old.
Source: The Nikkei Shimbun, August 30, 2012.