New construction pre-sales slowing

Over the past three years, the number of buildings selling out before completion has dropped to just 50%. For some developers, this can spell disaster, but a surprising number have the patience to wait and take a slower approach to sales. 

An oversupply of new construction on the manmade islands in Tokyo Bay has led to some extreme waits, with sellers waiting several years to offload their waterfront properties.

In July, Sumitomo Realty & Development finished construction of their City Towers Tokyo Bay project – a 1,539-unit, 3-tower apartment building located on the manmade island of Ariake in Tokyo Bay. So far, only 55% of the units have sold. It is expected to take a few more years for the building to sell out. The same developer is still advertising apartments in Deux Tours Canal & Spa, a 1,450-unit tower on Harumi Island, four years after completion. In 2018, Sumitomo started sales in Bayside Tower Harumi, a 352-unit apartment building across the street that had been sitting vacant since 2015. Nearby, developer Goldcrest is still advertising units in Kachidoki View Tower, a 712-unit building completed in 2010.

While the waterfront districts are facing the harshest conditions due to a never-ending supply of new construction, there are some pockets closer to central Tokyo where some projects are also seeing slower sales activity. 

This can be caused by a variety of factors. Pricing, which has been forcibly pushed up by high land values and construction costs, may no longer be in line with the product on offer. Existing housing stock on the resale market is now just as appealing to buyers as new construction, and in many cases offers an equally attractive apartment at a better price and in a better location. The marketing and hype for a new development is often short-lived, losing its lustre after the building is completed. 

According to research firm Tokyo Kantei, 49% of the apartment buildings built across greater Tokyo in 2018 had sold out prior to completion. This was about half of the number seen in 2016. The ratio peaked in 1987 with 97.5% of buildings selling out prior to completion. 

The Nikkei Shimbun, December 8, 2019.
Tokyo Kantei, October 31, 2019.

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