Tokyo Resale Property Market Overview

30 Oct 2020

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    Shortage in supply of new-built condominium pushes up demands in resale market

    The sustainable growth of the Japan property market has been supported by a steadily growing population in the metropolitan areas. As such, the shortage in supply of new-built condominium is leading more people to turn their eyes towards relatively new condominiums in the resale market. The Japanese traditionally favor new-built housing, but the recent trends tell us that there has been a change in the people’s perceptions in the age of a building or property. Today, we will look at more insights of the recent trend in resale market.

     

    Demand of housing remains strong

    The population growth in metropolitan areas like Tokyo has been showing a steady increase. COVID-19 has changed our living and working styles in various ways, but the impact on housing demand is limited. Market observers commented that more people from the city central areas are moving to spacious houses in countryside because of working from home (WFH) was being introduced during the state of emergency in April 2020. Indeed, according to the survey by Tokyo Shoko Research survey, 56% of companies adopted WFH at the time. However, in August, the companies still continuing with WFH reduced to 34.40%.

    Looking at the demographic movement in Tokyo, COVID-19 did affect the population movements, but not to the extent to call it as a population outflow. Indeed, demography by nationality showed the decrease in population was largely contributed by foreign residents returning back to their countries. As of August 1, Japanese population has increased by 58,114 comparing with January, while foreigner population has reduced by 4%.  

    In the long term, population growth is still in an upward trend. On year on year basis, the Japanese population in metropolitan areas is increasing, despite the state of emergency was announced in April to May period disrupted the usual influx of people expected for every new school year and fiscal year starting in April.

    Fortunately, real estate sales activity has sprung back to what it used to be before COVID-19. There is still a great demand for condominiums from the local owner occupiers and the decrease of foreigners do not seem to affect sales. When businesses resumed after the state of emergency, local buyers started actively looking for housing like before. On year on year basis, there were even more transactions in the resale market in August.

    Shortage of supply in new-built condominiums

    In recent years, the supply of new-built condominiums in Tokyo has been decreasing, despite of the growing population and housing demands. The choice limitations turned buyers to the resale market for secondary alternatives. Land acquisition has always been very competitive in the already developed central areas in Tokyo. As city urbanization continues, the shortage of supply in new-built properties is expected to push up the demands of resale apartments.

    Properties below 20 years are actively sought after

    New-built housing has always been the most preferred option for Japanese, because historically, houses in Japan were built by wood. It was believed that the newer the house, the better would be its durability. However, the situations are different today. With fewer new-built options and the advancement of superior construction qualities, resale apartments are generally now more accepted.

    As more buyers opt for resale markets as a substitute for new-built apartments, it resulted in the majority of transaction volumes concentrated in the relatively new buildings with age below 20 years. In terms of the transaction ratio against the supply, the building aged between 6 to 10 years shows the highest demand last year, followed by those of 11 to 15 years, 16 to 20 years and 0 to 5 years.

    Recommendation is up to 15 years old

    The observations showed that transaction volume zone is within 20 years old and so, investing in property below15 years is the best recommendation with consideration of the exit timing as well. Although buildings of 20 years old might sound “old” for overseas investors, the locals feel differently. Although traditionally the Japanese adore new-built properties, nowadays more people are realizing that the construction qualities after the millennium 2000 have become excellent to provide strong durability. Especially properties from established developers are well-maintianed in very good conditions, which makes it no big difference to the new-built ones.

    Many Japanese developers have their own prestige brand names for their condominiums. Therefore, they put in their utmost efforts in maintaining their quality and reputation. Often, the building management is by developer’s subsidiary company so as to make sure the same brand quality is achieved.

    Because of the superior construction quality, it is unlikely that owners of such condominiums will need to pay substantial amounts for maintenance in the first 10 years. That is why many property management companies offers guarantee plans that cover minor repair costs, as there is not much pay out expected during this period of time.

    After the first decade, some replacements of appliances like air-cons, dishwashers, water-heaters may be required due to service lifespans, but in general, the properties will look no inferior to new-built ones and are equally competitive in the markets.

     

    Property price continues to grow in prime locations

    Both resale and new-built condominiums in Tokyo have been on a steep price growth since 2013. The growth until 2016 were largely affected by the great expectations towards Tokyo Olympic game, which has brought significant impacts on the property markets not only in Tokyo central, but also to surrounding areas. The growth in the most recent couple years was due to more sustainable and rational factors. Good connectivity, prime locations, redevelopment and superior quality apartments are enjoying appreciation, whereas those properties without these factors are being left behind from the continuous growths.

    The demand for a good property in terms of quality and location is expected to remain strong in central area, as working in office is still a daily norm for majority. The shortage of new home supply will still continue, as land acquisitions will remain competitive in prime locations, which in turn can push up values of the existing good properties. It is therefore a good opportunity to widen your options to consider resale properties with strong growth factors.

    For more information, please contact us at +852 3759 0909 or email us at irp.hk@ap.jll.com or enquire now from here.

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