What can cause an apartment’s value to fall after purchase?

The following is a list of some negative factors that can cause an apartment’s value to fall over time. Some of these points may impact resale value more than others. 

The negatives:

  • Proximity to unpleasant facilities. Eg. a cemetery, crematorium, place of adult entertainment, garbage incineration plant, gas tank, factory dealing with hazardous materials, sewage treatment plant, gas or petrol station, or a warehouse with large vehicles coming and going. Properties near something undesirable may be relatively cheap to begin with, and a buyer might think they can put up with the surroundings if it means they can get a good bargain. But what happens when they want to sell the apartment down the track? Are future buyers going to want to put up with the same thing, or will they also be expecting a bargain price? 
  • Far from a train station (eg. bus required to get to train station, or a 15 minute + walk)
  • Low train station appeal. The nearest station may be one that is far from central Tokyo or on an inconvenient train line. Eg. one that requires several transfers to get to popular stations. Or, the station may have very little retail facilities around it which means local residents have to travel to buy daily necessities.
  • Located on the ground floor. While some ground floor apartments may be above street level due to an elevated site, the simple fact that they are technically on ground level means they may be passed over by some buyers. Real estate listing sites often have a feature to let the user eliminate any listings that are on the ground floor of a building, which can mean your property is ignored by potential buyers.
  • No natural light. Eg. an apartment that is only facing north, or looks into other buildings. Other reports, however, have shown that north-facing apartments in brand new buildings can sometimes appreciate in value over time (read more here).
  • No neighbourhood atmosphere. Eg. an area with very little to offer in the way of banks, retail, hospitals or schools. Places that have seen little urban development. Shops are shuttered, apartments are empty and rental demand is low.
  • No history. Eg. a place that has been recently developed from vacant land, forest, fields or reclaimed land. Be cautious of “Newtowns” which are manufactured communities. At first they are beautifully landscaped and affordably priced to attract first home owners and young families. However, as the residents age and their children grow up and move out, the local facilities that relied on the younger generation began to close down. The new town becomes old along with its residents and property values decline.
  • Balcony overlooks a busy street.
  • Fronting onto a highway or expressway. Noise and pollution can deter future buyers.
  • Very few shops nearby. Supermarkets nearby are the type that close early (eg. 7pm). Buyers prefer access to supermarket with longer hours, such as 24hr supermarkets.
  • Building is too small in scale.
  • Building is too large in scale.
  • Expensive monthly building management and repair fund fees.
  • Self-managed building as opposed to one that is managed by a reputable management company.
  • Poorly maintained.
  • Adjoining a car parking lot, vacant land, company dormitory or old and run-down building. There is a chance that the neighbouring block could be sold and turned into a high-rise that could block your views and sunlight.
  • In an industrial area.
  • A size or type that does not match market demand. Eg. a 60 sqm 2-bedroom apartment in an area where buyers are mainly looking for smaller 1-bedrooms. Or a 1-bedroom apartment in a family area where buyers are looking for 3 or more bedrooms. If your apartment doesn’t match the type of buyer in the area, it may be hard to sell.
  • If there have been any suicides or unnatural deaths either within the building or within your apartment. This can happen after you have purchased and is out of your control.
  • If the building was built on the site of a former hospital or laboratory.
  • Unusual or odd floor plan.
  • No elevator.
  • In an area easily prone to damage from earthquakes (eg. liquefaction) or flooding.
  • On soft ground (eg. reclaimed land) which is at risk of liquefaction or with active earthquake faults nearby. While the building itself may have the latest in earthquake-resistant construction, back-up power generators and emergency supplies, these anti-disaster measures don’t extend beyond the property line. What will happen in the immediate neighbourhood?
  • In low-lying land where water can easily accumulate.
  • In an area with relatively low market rent.

Click here to read about positive factors than can help to retain or even add to the value of an apartment.

Source: MyNavi, December 20, 2013.

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