You Asked Us – “Does Age Really Matter?”

Japan Real Estate

Japan Investment Property

26 Sept, 2017 –

Location, location, location is what we hear about most when it comes to real estate. But what about age?

A major change to Japan’s Building Standards Act for earthquake resistant construction methods occurred in 1981. While 1981 may be the pivotal point for some real estate investors when purchasing an apartment unit in a co-owned building, it may surprise you to know that what is more important than the building’s age is actually the building’s management.

Management ensures that the building maintains sufficient funds for repairs, renovations and refurbishments to the exterior and roof, boiler, water pipes, light fixtures, elevators, electrical breakers, etc. When purchasing a unit, be sure to conduct due diligence to ensure that the accumulated funds collected from unit owners are sufficient to cover repairs and ongoing maintenance. If funds are depleted, then the renovations history should reflect the expenditure.

As an example, you might find a unit in a property built in 1979, prior to changes to the Buildings Standards Act, recently renovated, with a stable tenant. And, you might find another unit in a building built in 1985, after the changes to the Act, with no renovations and insufficient funds for maintenance and repairs. Because of the maintenance, the 1979 building would likely have a higher occupancy rate posing less of a risk to your cash flow investment. A far more attractive purchase, regardless of its age. Sometimes the year of build matters less than the renovation history.

And, back to location, if this same older building is under 10 minutes walking distance to the nearest train or bus station and centrally located, it would most definitely be worth considering. But, don’t take too long, attractive units like this don’t last more than a few weeks, sometimes days in the Japanese property market.

The 1981 Building Standards Act doesn’t apply to all structures. It is more significant for reinforced concrete blocks, which are most large apartment buildings in Japan.  Age is less relevant when purchasing an entire building with land independently owned. In this case, the focus would be on renovations to raise value rather than year of build.

(Source – Priti Donnelly, Nippon Tradings International”, Pic – Nippon Tradings International )

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