Shared amenities’ impacts on condominium resale values

• DOI: https://doi.org/10.1108/IJHMA-03-2019-0038
• Pages: 281-297
• Date: 08 August 2019
• Published date: 08 August 2019
• Author: Kayo Tajima
• Subject Matter: Property management & built environment

Shared amenities’impacts

on condominium resale values

Kayo Tajima

Department of Economics, Rikkyo University, Tokyo, Japan

Abstract

Purpose –This study aims to analyze whether and how condominium shared utilities and facilities (e.g.

community spaces), of whichbuyers assume a share of the ownership upon acquisition of a residential unit,

affect the condominiumunit price over time.

Design/methodology/approach –The transaction price of each unit ref‌lects the quality of the residential

unit and the properties of the shared facilities. Based on the hedonic pricing method, this study assesses the

impact of shared amenities on unit resale prices, using an original data set on condominium unit resale

transactions and the status of housing characteristics for both condominium units and condominium buildings.

Findings –Results show that holding other conditions constant, a meeting room and an externals pace

that can host events inc rease the unit resale price by approxi mately 7 and 16 per cent, respectively . Some

community amenitie s such as a meeting room may inc rease its impact later in the c ondominium’s lifetime.

Research limitations/implications –Because of the proprietarynature of data, the analysis focuses on

high-end condominiumproperties in central Tokyo. Although it is diff‌icult to single out the shared amenities’

effects on condominium resale prices from potentially confounding factors, this study partially overcomes

this issueby including explanatory geographical variables(e.g. ground heights).

Practical implications –The results suggest that ashared facility that hosts social interactions among

residents signif‌icantlyaffects the resale market value of housingunits and that their magnitudes may change

over time.

Originality/value –To the best of the author’s knowledge,this study provides the f‌irst empirical evidence

of the impactsof shared structures on condominium unit sales usingmicro-level transaction data in Japan.

Keywords Social interaction, Housing prices, Tokyo, Resale prices, Community spaces,

Condominium

Paper type Research paper

Introduction

In the center of Tokyo, the world’s largest urban agglomeration, an increasing number of

households are choosing to own and livein condominium units. Across 23 special districts,

3.3 million out of 4.25 million households(77 per cent) live in multi-family building units. Of

the 1.97 million householdsin owner-occupied housing units, 53 per cent (1.05 million) live in

multi-family building units, according to housing and land survey (Statistics Bureau,

Ministry of InternalAffairs and Communications, 2013).

The resale (asset) value of a homeis extremely important for a condominium unit owner

because house values account for a major partof owners’assets. For an average household

with two or more members in Tokyo’s 23 special districts, real estate (land and building)

represents 79 per cent (¥52,736,000)of total assets (¥66,580,000), which include savings and

f‌inancial assets (Table 34 in the National Survey of Family Income and Expenditure, 2014).

At the national level, real estate accounts for 67 per cent (¥23,239,000) of total assets

(¥34,906,000). These statistics show that the asset portfolio of Japanese households relies

considerably on home values, and high land prices in Tokyo have exacerbated this

dependence.

Shared

amenities’

impacts on

condominium

281

Received24 March 2019

Revised12 May 2019

Accepted23 May 2019

InternationalJournal of Housing

Marketsand Analysis

Vol.13 No. 2, 2020

pp. 281-297

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-03-2019-0038

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1753-8270.htm

However, despite the importance of housing values to Japanese consumers, there are few

empirical studies on the prices and the quality of the used multi-family structures (Yoshida and

Sugiura, 2015;Diewert and Shimizu, 2016;Okano, 2019). According to Japanese legislation for

condominium ownership [Act of Building Unit Ownership, 1962 (Law number 69)], unit owners

share owner ship o f the building structure, utilities and various amenities[1] based on the

amount of f‌loor space that they exclusively own. The cost of maintaining a building structure

and shared utilities or amenities is incurred by the owners’association–unitownersvoteon

association matters such as hiring a professional third-party maintenance company or

repairing building damage, and contribute a monthly payment. In essence, each unit owner

buys a condominium unit that includes several shared estate properties (e.g. club goods). As the

condominium housing structure was a new “invention”in the postwar period[2], Japanese

society is now facing a new challenge of aging condominium structures.

Condominium estate developers have reacted to the competitive housing market by

offering various common amenities that appeal to consumers. Under construction cost and

building regulation constraints suchas f‌loor-to-area limits, an additional shared amenity is

generally provided at the expense of additional f‌loor space for residential units. Thus, it is

likely that developersattempt to recover the costs of shared amenities by adding them to the

price of the condominium units during initial sales. With the small size of residentialunits,

the buyers of these condominiums are likely to consider some community spaces as

substitutes or complements of the f‌loor space in their own units. However, while it is

popularly recognized that both better-governed and higher-quality shared amenities make

condominium units more desirable, few empirical studies have tested this hypothesis by

using actual transaction prices and detailed information on the shared amenities of

condominiums.

When estimating the “treatment”effect of shared amenities on resale prices, it is

necessary to pay attention to the confounding factors that affect both housing quality

(including the existence of shared amenities) and prices. Housing prices in Tokyo are

determined by the community in which the buildings are located. As Jinnai (1985)

graphically portrays, community characteristics have historically been determined by the

natural topography on whichhistoric land use in the seventeenth century was based.Upper

class (warriors) were allowed to holdestates uptown (Yamanote) that were more resilient to

natural disasters, while commonerswere assigned to occupy the low land (Shitamachi). The

characteristics of modern-day communities are also dependent on the provision of public

goods and amenities such as parks, museums and universities built on the former upper

warriors’estates on high ground. Employment locations are also dependent on the natural

topography; commercial activities are concentrated in the low land, while government,

education and researchinstitutions are on high ground.

This study estimates the effectof shared amenities on condominium unit prices by using

original data for 2,697 transactions of usedcondominium units combined with data for 211

condominium structures to which these units belong. The use of transaction prices, which

are rarely available to researchers in Japan, is superior to the often-used list prices for

estimating consumer valuation. The estimation results suggest that a meeting room, an

external space that can host events, and a courtyard, respectively, increase the unit resale price

by approximately 7.0, 6.5 and 14.1 per cent when the number of units in a condominium and

other conditions are controlled for. When the number of units is not controlled for, the effects of

these facilities on unit prices are estimated to be 2.8, 5.1 and 13.1 per cent.

With growing consumer interest in maintaining the asset value of housing, it is

important to estimate changes in amenityvalues over time. By using resale transaction data

for 16 years(2000 to 2015) combined with a survey of shared building amenities, this study

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