Commons questions from buyers interested in purchasing older units and renovating them in Tokyo. 

How much cheaper are second-hand apartments compared to new ones?

A lot cheaper than new ones! In central Tokyo, depending on the area you purchase in, second-hand units are on average 20% cheaper than a new unit. This of course depends on the age of the unit.

For example, a 10-year-old unit in the 23 wards is usually around 5–10% cheaper, a 20-year-old apartment between 15–25% cheaper, and a 30-year-old place might sell for 20–40% less than a brand-new place. 

Additionally, no consumption tax (8%) is charged on second-hand units if both buyer and seller are individuals (consumption tax is however due for brokerage fees).

How do I vet a second-hand apartment for its renovation potential?

Either with a real estate agent knowledgeable in used apartment sales or ideally with a representative you hired from a renovation company, visit the unit and check for the following things:

• The general state of repair — or disrepair — of the whole building (interior and exterior).
• Is there enough money saved up in the building's reserve fund and what big ticket items might be planned in the near future?
• Any supporting walls, beams  or duct spaces that cannot be moved or changed.
• Are the floors floating (i.e. is there a space between the concrete and the flooring boards that allows for pipes)? If not, it will be hard or impossible to move the kitchen or bathrooms.

I see the terms ‘renovation’ and ‘reform’ used on Japanese real estate sites — do they mean the same thing?

These terms have different meanings. Reform is used to describe the replacement of flooring and wallpapers and updates to specific areas, like the bathroom and kitchen. Renovation refers to a more complete overhaul, including potentially changing the walls and layout of the apartment.

How much do renovations cost?

While the cost of renovating an apartment vastly depends on the unit size, scope, and quality, people spend on average around JPY 7 million, according to Property Central Japan. However, on average, a second-hand apartment plus the renovation cost is still 10–20% cheaper than a new unit.

Are second-hand units an investment with resale value?

The market for second-hand apartments in Tokyo is flourishing. According to REINS, in 2018, almost half of all apartment sales were used units, with numbers steadily increasing over the last few years. 

Additionally, banks would  previously lend money only on the more favourable mortgage terms for the property itself, but a loan for renovations needed to be taken out separately at higher interest rates. However, in recent years, many financial institutions started to offer mortgages that also include renovation costs, which made secondhand units more appealing again, especially with the price hike of real estate in Tokyo over the last few years.

Can you flip a house in Tokyo?

While it is possible to flip a home in Tokyo, renovations here are pricey, reducing the margins. Very few companies specialise in buying, renovating, and reselling property here and their gain is usually around 10%.

What happens if the building in which I purchased a unit is slated for demolition?

Buildings in Japan can  be demolished only if all members of the owners association mutually agree. So in general, if the building is in good order and it is obvious that the management has been keeping up with repairs, take it as a sign that the other owners have a strong interest in keeping their units — and the risk of the building suddenly being discussed for demolition would be rather low. There is the rare and lucky case where a large developer offers to buy the whole building at a high rate to construct a new building on the plot of land.

Is it better to buy a new property in the long term?

If you are concerned about the long-term value of and quality of life in your property, it is even more important to check the unit and building carefully. Despite the often-heard phrase that buildings in Japan have a lifespan of 30 years, there are many concrete buildings in Tokyo that have been standing for 40, 50 or even more years. It all comes down to how well maintained and managed the building is and if large-scale renovations beyond regular maintenance are carried out when they make sense so that the building doesn't feel dated. 

Finally, a well-executed renovation can certainly give you the same quality of life as a new apartment would, while saving you several million yen.

By Mareike Dornhege

Similar to this: 

How to flip a Japanese home

Old versus new properties in Japan: Which to choose?

Doomed to depreciate: The limited life span of a Japanese home explained