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More trouble and bankruptcies in the real estate market; Renovated condos more appealing to buyers?

September 5, 2008
By Ken Worsley


Over the past week, condo developer Sebon filed for bankruptcy with about 62 billion yen in liabilities, while FEC, another condo developer, filed for bankruptcy protection with about 13 billion yen in liabilities.

New condos simply aren’t selling the way they used to, and the squeeze on bank lending to real estate developers is going to start hurting those firms that have survived on credit lifelines rather than sales first.

But the real story here is the result of a recent survey conducted by Next and published in the Nikkei a few days ago. Apparently, over half of respondents stated that they would choose buying a renovated existing condo rather than a brand new unit, provided that they could save about 5 million yen in the transaction.

With the average price a new condo in Tokyo up 9.3% last year, it’s no wonder buyers aren’t looking to buy new places. But with sales of new condos down 17.9% in 2007, the real mystery is why these bankrupt firms didn’t get into the condo renovation business when they still had a chance.

Filed Under Business, Real Estate 

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Comments

5 Responses to “More trouble and bankruptcies in the real estate market; Renovated condos more appealing to buyers?”

  1. Martin on September 5th, 2008 8:47 pm

    the squeeze on bank lending to real estate developers is going to start hurting those firms that have survived on credit lifelines rather than sales first.

    So real estate development firms connected to banks should be ok? Even in share price?

    Prices are up out of line with what people want to pay, no doubt. But they are going to have to get used to the idea of more expensive housing that offers greater benefits. The public has been noisy for years that it wants better quality housing, and when it comes on the market they don’t want to pay. Boo-hoo!

  2. Ken Worsley on September 6th, 2008 12:19 am

    Martin,

    So real estate development firms connected to banks should be ok?

    Of course.

    Even in share price?

    Let’s see your analysis.

    As far as the rest goes, I’m not sure what you’re talking about.

  3. globetrotter on September 6th, 2008 5:44 am

    Condos are not the only thing in Japan that are in the economic decline. Apparently sales from import cars are at a big time low as well. Source

  4. Houser on September 6th, 2008 4:51 pm

    The public has been noisy for years that it wants better quality housing, and when it comes on the market they don’t want to pay. Boo-hoo!

    I doubt what’s out there now is much better in quality. If the prices are substantially above what consumers will pay, boo-hoo is not for them, it’s for the firms overcharging. They are the ones who will suffer.

  5. Ken Worsley on September 9th, 2008 12:29 am

    Is overcharging really the way to put it? Increased costs and governmental regulatory interference play in here as well. TSR estimates that about 113 bankruptcies have been the direct result of revisions to the Building Standards Act:

    建築基準法改正関連倒産が8件、8月末時点で累計113件

    8 bankruptcies in connection with the revisions to the Building Standards Act (in August), a total of 113 to the end of August.

    http://www.tsr-net.co.jp/new/zenkoku/monthly/1178943_807.html

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