Is it smart to buy a South-facing apartment?

When looking at an apartment to buy or rent in Japan, everyone is told to look for places that are south-facing as these rooms get the most sunlight throughout the day and year round. Real estate search engines even have “south-facing” as a search option.

As such, south-facing apartments command a premium price over units facing other directions. Many consider north-facing to be the most undesirable as it receives the least direct sunlight. It would seem safe to assume that purchasing a south-facing apartment would be a sure-bet. But is this really the case?

An apartment facing which direction will increase in value after you purchase?

A recent survey by Attractors Lab has shown some interesting results.

The answer is North

On average, north-facing units tend to increase in value after purchasing from the developer, while South-facing units tend to depreciate.

This is an interesting point to consider when you are looking to purchase a new apartment from a developer.

Data on over 196,000 apartment sales from 2006 to 2010 was collected by Attractors Lab. The price of north-facing units on the second-hand market increased by an average of 11.4% from their original price when new.

The price of south-facing units, however, decreased by an average of 5.4% from new.

Some of the reasons for the change in prices are:

  • Developers price south-facing units higher, and north-facing units lower.
  • In the second-hand market, units of various types and directions appear randomly for sale.
  • Purchasers will prefer a north-facing unit with a wider frontage and good views over a south-facing unit with narrow frontage and less impressive views.
  • DINKS prefer an open view that is not blocked by other buildings, and are less concerned about all-day sunlight if they are both working full-time and return home late in the evening.

Tokyo’s Chuo, Minato and Koto bayside areas saw the steepest price rise in north-facing units.

In high-growth areas where the typical family configuration is becoming smaller and lifestyles change, the belief that “south-facing is absolutely the best” is starting to fade.

On another note, according to Etsusuke Masuda of Jipangu Holdings, there are only four train stations in the World that are used by over 1,000,000 people per day, and they are all in Japan. Three of these stations are in Tokyo (Shinjuku, Shibuya and Ikebukuro Stations), with the fourth in Osaka. With the population and economic activities highly concentrated in Tokyo, the future for real estate looks bright.

Source: The Asahi Shimbun, February 11, 2011.