Market for secondhand apartments improving

The prices of secondhand apartments are moving on up. According to Tokyo Kantei, the average asking price of a 70 sqm apartment in greater Tokyo was 28,210,000 Yen in October, up 1.1% from the previous month. This was the first time in 8 months that the price had exceeded 28 million Yen.

Unlike new apartments, private sales of second-hand apartments are exempt from consumption tax (it is, however, charged on the brokerage fees). While the planned increase in the consumption tax rate may not directly impact the resale market, sellers are starting to see that the market is improving and are in less of a hurry to sell.

Central Tokyo apartment prices up 1% from the previous month

The average advertised price of a 70 sqm apartment in the Tokyo metropolitan area was 37,160,000 Yen in October, up 0.6% from the previous month. The average price in Kanagawa Prefecture was 24,220,000 Yen (up 0.7%), 18,530,000 Yen (up 1.5%) in Saitama Prefecture and 17,870,000 Yen (up 0.3%) in Chiba Prefecture.

In Tokyo’s central 6 wards (Chiyoda, Chuo, Minato, Shinjuku, Bunkyo and Shibuya) the average price was 54,580,000 Yen, up 1.0% from the previous month. Prices have now seen month-on-month increases for the past three months.

According to Tokyo Kantei Senior Researcher Toshiaki Nakayama, second-hand apartment prices are closely linked to land prices. The recent turnaround in land prices is starting to push up apartment prices. Buyers are also feeling pressured to purchase now while prices are still relatively low, under expectations of increasing property prices and rising interest rates. This is fuelling demand and putting more upwards pressure on prices.

The popular areas in central Tokyo are seeing a shrinking supply of both new and old apartments on the market, which is also pushing up prices.

Investors looking for rental properties

Nakayama also pointed out that the recent revisions to the inheritance tax has also spurred investment from buyers looking for properties to rent out. Under the tax revision, the basic deduction will be reduced by 40% which will increase the tax burden for many heirs.

Rather than leave their children with cash or other financial assets, some people are choosing to put their money into apartments.  While the inheritance tax on assets such as cash is charged at face value, for real estate it is calculated based on the fixed asset value and rosenka land valuation. These valuations are usually lower than market prices, so the inheritance tax obligation may be lower than the actual resale value of the property.

Source: J Cast News, December 1, 2013.

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