Desperate sellers in ski resort town forced to pay buyers to offload apartments

Some owners, in an attempt to offload their apartments in aging ski resort towns, are paying companies to take the properties off their hands. For companies offering this relatively new service, charging fees to the seller is how they balance the risk of holding a property that comes with high running costs and limited resale potential.

How it works

According to the website of a company that specializes in buying up resort apartments, they ask the seller to pay them enough to cover the following:

  • Property registration and acquisition taxes, normally payable by the buyer.
  • Between 1 to 3 years of building fees and annual property taxes.

 

The website goes on to explain that the advertised asking prices of many resort apartments are much higher than what properties end up trading for, with some properties reportedly selling for less than half of their list price. With low demand, some properties can take anywhere between 1 ~ 5 years to sell.

Holding costs are relatively high for resort apartments, especially those in buildings with facilities such as restaurants and heated pools, and that require snow removal. Just owning a 1-Bedroom apartment can cost upwards of 400,000 Yen (3,600 USD) a year in fees and property taxes.

There are some reports from building owners associations, however, that the companies acquiring these properties are not paying the monthly building management and maintenance fees, which is causing further headaches for other owners in the buildings.

One seller in the ski resort town of Yuzawa in Niigata Prefecture paid 1,150,000 Yen (10,000 USD) to one of these companies to offload a 20 sqm studio apartment in a resort building. The apartment had annual building fees and taxes of 180,000 Yen (1,600 USD). They initially tried advertising it publicly through a real estate agency with an asking price of 400,000 Yen. In 12 months they had received one phone inquiry but not a single inspection.

A real estate agency stands to make 3 ~ 6% in commission from the sale of a property. For very low-priced properties, it is barely worth the effort from a business standpoint. With about 2 publicly reported sales in the Yuzawa area annually, and around 150 properties on the market at any one time, the resale market is limited.

Land in old holiday home areas selling at <1% of original purchase price

In some of Japan’s holiday home areas developed during the 1960s, ‘70s and ‘80s, sellers are looking at lengthy waits and large discounts in order to sell their properties.

One seller purchased a 300 sqm block of land in a managed holiday home subdivision in Shizuoka’s Izu peninsula in 1991 for 13 million Yen with the aim of using it in their retirement. The property was costing them approximately 50,000 Yen a year in resort management and property taxes. Since their children had no interest in inheriting the land, the family listed it for sale for 1 million Yen (approx. 9,000 USD). No buyers came forward. The seller even inquired about donating the land to the local city, but the city was not interested. The price was eventually dropped to 180,000 Yen before a buyer finally came forward with an offer of 100,000 Yen (approx. 900 USD). The fees they ended up paying to their real estate agent amounted to 210,000 Yen, resulting in the seller having to pay 110,000 Yen out of their own pocket to complete the transaction.

According to local agents, land in these holiday home areas occasionally sells for between 100,000 ~ 200,000 Yen to people looking for garages, gardening spaces or even dog runs. To the current generation of buyers, the land is not considered an asset or investment, but rather a utility.

Source: The Asahi Shimbun, August 12, 2017.