If you look at Investopedia, co-op housing, aka a housing cooperative, is a structure where owners own shares in a company that owns the property.  Also, if you are reading from the US you might automatically assume that owning a co-op unit means you don’t own the land. 

In Japan the definition is different; co-ops are freehold land ownership and you own the property outright.

Sample finished co-op development in Tomigaya, near Shibuya / Yoyogi.

How it works is this; the developer of a proposed co-op project identifies a plot of land that might be suitable for a development.  The developer buys the land and instead of taking a chance and building a structure they think will sell, they will elicit owners to apply for ownership and once each unit has a designated owner, then construction begins. 

There are two main benefits to this type of purchase; owners are able to have more say in what the final product will end up being at the design stage and also, these types of properties can be had brand new for 20 to 25 percent less than a similar sized resale condo. 

The price advertised for these units are assuming that owners will not deviate too much from the proposed architectural specifications and that unit owners would select materials from items the architect has shortlisted.  

Sample finished co-op development in Naka Meguro.

This means that should you want higher grade materials for the interiors then you would need to be prepared to pay more.

That said, as opposed to a brand new condominium complex where the developer is trying to mark up materials and labour as well as land in order to maximise profits, co-op developers usually bake their profit into the land they are reselling and also charge owners a project management fee to oversee and manage the construction.  

The labour and materials are paid by owners at cost with no other mark ups, which is where the cost savings come in.  During the process, there is a review of construction estimates which could fluctuate depending on raw material pricing.  In the event of a price change, the owners can choose not to continue through the purchasing process by forfeiting their deposit.

That said, other than the price of lumber in the last year as an example, which spiked during the pandemic but has since settled again once the supply issues were worked out, there hasn’t been another case of where the final estimates deviated largely from the original estimates. 

If a particular owner disagrees with the common area or exterior proposals strongly, then either a compromise is made or that owner looks elsewhere for another property.  Should a majority of owners disagree strongly, then a compromise is usually worked out on the developer side. 

Sample finished co-op development in Yoyogi.

Once all units are sold in a co-op, then a management union is formed, very similar to a Homeowners Association you would find in a condo complex.  That association would then operate the same way you would find in a condo; a building manager would be hired and a repair reserve fund set up for ongoing maintenance of the building. 

In the past, co-op properties were difficult to finance.  Technically in Japan, a loan can’t be granted until the structure is built.  

In the case of a co-op, imagine there are 20 units in a proposed development and you are one of the first applicants. It can take up to 12 to 18 months to source buyers for all the units and then take an additional 2 years until completion; a timeframe that made lending difficult from the bank’s perspective. 

However, given the rise in developers offering co-op projects, banks have adapted their bridge loans to include servicing co-op buyers which has made the financing process much smoother.

Sample finished co-op development in Takanawa.

Bridge loans were originally intended for single family home sellers to be able to partially finance their new property while still selling their current one.  With the rise of co-op developments, banks have adapted their bridge loan offering to service buyers wishing to buy a co-op. 

Developers don’t advertise these properties on property portals making them hard to find.  Reasons for which can vary depending on the developer; some would rather have introductions from their own network given the long relationships buyers will have with the project.  Other firms prefer to have their listings be so-called back-pocket listings, adding to their allure. 

I’m unique as an agent in that I find these properties fascinating, both in terms of the flexibility they offer buyers for the interiors, their usually great locations and also their savings; you are basically ending up with a brand new condo for less than what the resale market is at. 

Given the lack of marketing with these developments, I have created a mailing list specifically for buyers interested in learning more about what projects are out there.  

If you’ve read this far then I reckon you must be interested.  For clients, the process is more involved than buying a brand new condo, but not as involved as building your own single family home.  However, the developers don’t speak English which is where my services come in.

If what you’ve read has spoken to you, then please do reach out and ask to be put on my mailing list for updates on new developments as they appear.

Further Reading

Click here to see general purchase co-op outline.