Aging City and House Prices: Impact of Aging Condominium Stock on the Housing Market in the Tokyo- Metropolitan Area

Abstract

Based on an analysis of the housing market in the Tokyo metropolitan area, this study focuses on the external diseconomies of aging condominiums. It is possible that the quality of the condominium stock deteriorates more rapidly than that of ordinary housing. This deterioration in quality leads to a reduction in the quality of housing services received by residents. Furthermore, this worsening of the residential environment may lead to external diseconomies. We run hedonic models to identify the external diseconomies of aging condominiums in the residential market of the Tokyo metropolitan area. The results of our estimated models indicate that such external diseconomies occur for detached housing in areas where detached houses and condominiums coexist. These external diseconomies exert downward pressure on prices. Specifically, detached housing prices are lowered by around 3.2% for each 1% increase in the proportion of total building floor area in neighborhoods where condominiums were built before 1990. In other words, aging condominiums begin to generate diseconomies in their vicinities approximately 20 years after they were built.