Ban on advertising new and old property price to be lifted

Moves are underway to lift the ban that prohibits advertising the former price of a secondhand property or land alongside it’s new and reduced price.

Currently, this form of advertising can only be used on brand new construction less than two years old, and which has never been occupied.  Certain terms relating to the length of time advertised also apply. It is expected that the law will change this summer to allow advertisements for secondhand properties and land to use the same method.

The ban on ‘double pricing’ for brand new properties was only lifted after the crash of the bubble economy when developers were left with an enormous stock of unsold apartments.

Following the Lehman Shock in 2008, developers were often seen advertising 5 million Yen discounts on unsold units, which gave rise to the term ‘outlet mansions’. This gave consumers a sense of bargain and sales were positive.

Meanwhile, the secondary property market remains in a slump. While one might assume that allowing double pricing advertisements would help the secondary market as well, property brokers, however, are not so eager to see the ban lifted.

Why?

“The advertised price on secondary properties is considered to be the reference point for the start of negotiations. It is the price at which the vendor wants to sell, but the listing price is only the final selling price in very rare cases.” – Major real estate brokerage.

President Yuki Kazuto of Urinushi-no-mikata sales brokerage said that the average difference between the listed price and final selling price is as much as 10%.  According to research by Tokyo Kantei, the average difference between the listing and selling price for secondary properties in greater Tokyo for the last three years has ranged from 6.6 to 10.2%.

Tokyo Kantei believes that ‘double price’ advertising may lead buyers to think that the seller will lower their price even further and could cause restrained buying or further demands of price reductions.

However, advertising the old and new prices can spur some movement in the market. Kazuto believes that by showing the amount of the price reduction, buyers may feel that they still have some room for negotiation.

The future effects are uncertain and many major real estate brokerages are taking a wait-and-see stance.

Source: Shukan Diamond, May 9, 2012.

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