Building age vs. distance from station – which has the biggest impact on rent?

According to data released by Tokyo Kantei, an apartment building’s age has a bigger influence on rent than the distance from the nearest train station.

The difference in rent between an apartment less than 3 years old and a 30-yr old apartment is about 30 ~ 40%. Meanwhile, the difference in rent between an apartment less than a 3 minute walk from the nearest station compared to one 11 ~ 15 minutes away is around 20%.

Although average rents across all apartments have shown recent growth, data seems to suggest that the number of new and near-new apartments hitting the rental market are having a strong influence on average rent, while rents in older buildings are staying relatively flat.

Tokyo’s 23-ku

The newer apartment buildings are attracting higher rents. In Tokyo’s 23-ku, the average monthly rent of a 3-yr old apartment in the first quarter of 2014 was 4,081 Yen/sqm, up 3.8% from 2013 and up 12.7% from the recent bottom in 2012. Rents are 3.4% lower than the peak in 2008.

In 30-yr old buildings, the average rent in 2014 was 2,603 Yen/sqm, up just 0.7% from last year and up 1.4% from 2012. Rents are down 14.7% from their peak in 2008.

As you can see in the graph below, the average rent of new apartments has typically remained around 700 ~ 800 Yen/sqm higher than the average for all apartments, but in the past year it has increased at a higher rate. Since 2012, a growing number of new apartments have been purchased by investors and put up for rent as soon as the building was completed. This has pulled up the average for the 3-year old apartments.

Osaka City

Osaka’s rental movements show similar trends to those in Tokyo. It is the 3-yr old buildings that have seen the highest growth in the past two years. While 15 and 30-yr old buildings have remained relatively stable over the past 10 years, the rental movements in 3-yr old buildings has been volatile in response to changes in the property market.

The average monthly rent of a 3-yr old apartment in 2014 was 3,114 Yen/sqm, up 7.2% from 2013 and up 20% from 2012. The average is now just 2% below the peak in 2008.

In 30-yr old buildings, the average rent dropped 0.9% from last year to 1,475 Yen/sqm. It is down 7.1% from its peak in 2007.

Nagoya City

Nagoya didn’t experience any rental growth in the lead up to the mini-bubble in 2007-2008.

In the past year, however, a number of investors have been purchasing new apartments with the intent of renting them out. This has caused the 3-yr monthly rent to jump by 15.4% from last year to 2,989 Yen/sqm.

The rent in 30-yr old apartments has been on a slow downwards trend for the past 10 years.

About the data:

The data focused on 40 ~ 100 sqm condominium apartments in Tokyo’s 23 wards, Osaka City and Nagoya City. Data was collected between 2005 and March 2014.

  • 3-yr old buildings = buildings up to 3 years old
  • All other ages = All buildings of that age +/- 1 year (eg. 15 yrs = 14 ~ 16-yr old buildings)

Source: Tokyo Kantei, May 7, 2014.

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