Renovation means remodeling an older home to give it functions close to those of a newly built property. Its defining feature is that it involves larger-scale changes than standard remodeling, improving the home's performance and value. Buying a pre-owned property and renovating it is drawing attention from both the investment-return and living-value perspectives.
What are the three advantages of renovation?
1. Much cheaper than buying a newly built property
According to a study by the Japan Housing Research Center, about 70% of condominium renovation projects cost JPY 3 million or less. A Mizuho Trust Bank study found that, as of 2018, the price gap between new and pre-owned condominiums in Tokyo's 23 wards had reached about JPY 26 million. In some cases, buying a pre-owned property and renovating it can save more than JPY 20 million. The price gap between new and pre-owned properties has been widening year by year, increasing the economic advantage of renovation.
2. Asset value is less likely to fall than with a new property
A newly built property is said to lose about 20% of its asset value as soon as it becomes pre-owned, and it then tends to keep falling. By contrast, renovated pre-owned properties tend to improve in asset value and are more likely to retain that value afterward. This is especially advantageous for people considering a future move or resale.
3. Easier access to properties in desirable locations
Supply of new properties in prime locations is limited, but pre-owned properties are often available in attractive areas such as near stations or schools. For buyers who want to prioritize location, pre-owned properties plus renovation offer more options than newly built homes.
What are the three disadvantages of renovation?
1. Problems such as rain leaks and water leaks can occur
In older properties, water leaks can occur when only the exterior has been refreshed without replacing the drainage pipes. Before buying, it is important to have a specialist check the condition of the plumbing and the structural frame.
2. Aging facilities can increase the cost burden
In particular, for properties more than 40 years old, renovation costs exceeding JPY 10 million are not unusual. A building inspection should be carried out in advance, and the likely costs should be estimated before making a decision.
3. It takes time before move-in
Renovation typically requires a construction period of one to three months. Compared with ready-built homes or newly built condominiums, it takes longer before the property can actually be occupied. A funding plan should also account for temporary housing costs.
Related reading
Frequently Asked Questions (FAQ)
Q. What is the difference between renovation and remodeling?
While remodeling is mainly intended to restore a property to its original condition, renovation is a large-scale upgrade aimed at improving the home's functions and performance beyond its current state.
Q. Does renovating a pre-owned condominium increase its asset value?
Generally, yes. By adding renovation to a pre-owned property whose price has already stabilized compared with when it was new, you can increase market value while acquiring it at a much lower cost than a newly built property.
Q. What is the typical cost range for renovation?
For condominiums, about 70% of projects cost JPY 3 million or less, but if the facilities are heavily deteriorated, costs can exceed JPY 10 million. We recommend understanding the expected cost through a prior inspection before deciding to buy.
Q. How do you find a property suitable for renovation?
It is important to check in advance whether it meets earthquake-resistance standards (the new standards introduced in the 1981 revision), whether it is well managed, and how deteriorated the plumbing is.
