According to REINS the share of properties sold that are over 30 years old is growing. In 2012, the average age of an apartment sold in greater Tokyo was 18.97 years, 0.70 years higher than 2011. Apartments over 30 years old comprised 20.6% of total second-hand apartment sales – up from 18.20% in 2011. The average age of a house sold was 19.71 years, up 0.34 years from 2011. Houses over 30 years old comprised 18.5% of total second-hand house sales – up from 17.5% in 2011.
Why the shift to older properties?
The simple answer is the relatively cheaper price. In 2012, the average sale price of an apartment over 30 years old in greater Tokyo was 12,870,000 Yen, or 225,700 Yen/sqm. Meanwhile, the average sale price of an apartment between 0 and 5 years old was 39,170,000 Yen, or 541,700 Yen/sqm – double the sqm price of an old apartment.
Also, a 30 year old apartment sold in 2012 would have been built in 1982 which is a year after the major change in earthquake-resistant construction standards. It is important to remember that not all apartments completed in 1982 would have been built to this new standard as planning and construction may have started a few years prior.
Buyers of older properties may opt to renovate it after purchase, or purchase a place that is already renovated or will be done so by the seller (usually a real estate company). When the seller of a renovated property is a real estate company, as opposed to an individual using a broker, there is a longer and more comprehensive warranty against defects.
Second-hand apartment transactions in greater Tokyo:
|Age||Average Sale Price||Average size (sqm)||Price (Yen/sqm)|
|0 – 5 yrs||39,170,000 Yen||72.31||541,700|
|6 – 10 yrs||36,410,000 Yen||72.09||505,000|
|11 – 15 yrs||30,900,000 Yen||70.32||439,400|
|16 – 20 yrs||20,040,000 Yen||64.05||312,900|
|21 – 25 yrs||15,510,000 Yen||60.35||257,000|
|26 – 30 yrs||16,890,000 Yen||60.74||278,100|
|30+ yrs||12,870,000 Yen||57.01||225,700|
Second-hand house transactions in greater Tokyo:
|Age||Average Sale Price||Average land size (sqm)||Average house size (sqm)|
|0 – 5 yrs||33,860,000 Yen||130.82||99.75|
|6 – 10 yrs||34,500,000 Yen||131.24||102.92|
|11 – 15 yrs||34,480,000 Yen||138.38||109.93|
|16 – 20 yrs||29,220,000 Yen||144.33||111.37|
|21 – 25 yrs||27,020,000 Yen||171.11||118.39|
|26 – 30 yrs||25,620,000 Yen||154.50||105.82|
|30+ yrs||22,230,000 Yen||156.06||93.19|
Building inspections and guarantees against defects
One of the main concerns when buying an older property is deterioration due to its age.
If the property was renovated by a real estate company, they will typically conduct their own inspection to detect any faults prior to carrying out any work. Because they must provide a guarantee for their renovation work, buyers can feel more assured.
However, if it is not renovated the buyer must rely on their own judgement. A typical buyer would not be able to identify any potential problems or defects on their own, so they may choose to hire a building inspector. While an inspection can identify any building deterioration, defects and maintenance issues that need resolving, the inspection company cannot provide a guarantee to the owner.
If a buyer wants a guarantee against defects, they must engage the services of a professional who will inspect both the construction of the building and its protection against roof leaks. If the property passes these tests, a government-authorised insurance company can provide defect insurance (called kashi-hoken) for a term of five years after purchase.
Sellers and real estate brokerages may also include defect insurance when selling a second-hand property, but if not, the buyer can elect to apply for it themselves.
Buying a home, even if it is a relatively cheaper old property, is still a large purchase and requires care and due diligence. The fees for a building inspection and defect insurance are only small in comparison, but may prove to be a valuable decision.
Suumo Journal, April 10, 2013.
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