What are the advantages and disadvantages of purchasing pre-owned condominiums?

When you go to the showroom or open house of a new condominium building, your mind gets caught up  in the glamorous interior.

However, in the same area, pre-owned condominiums are cheaper and attractive in terms of price.

What are the characteristics of pre-owned condominiums?

In this article, we will explain the advantages and disadvantages of purchasing pre-owned condominiums, as well as those who are most suited to buying pre-owned condominiums.

Benefits of purchasing pre-owned condominiums

What are the advantages of pre-owned condominiums compared to newly built condominiums?

Cheaper than buying new

The merit of purchasing pre-owned condominiums is the price is cheaper than buying new. 

If a condominium is of the same specifications in the same area, there may be a price difference of more than 10% even for a property built two to three years ago.

If you are willing to buy pre-owned,  you can consider properties with better location and specifications.

Easy to maintain asset value

Real estate prices consist of land and building prices, but in the case of newly built condominiums, the seller's advertising costs as well as other costs are added.

As a result, it is said that, in general, the rate of decline in building prices is high for about 10 years from new construction, and the rate of decline is moderate after more than 10 years of construction.

If you buy when the rate of decline in building prices stabilizes, you can moderately keep the rate of decline thereafter, making it easier to maintain asset values.

There is no consumption tax 

Consumption tax is not imposed on pre-owned condominiums because ordinary individuals are often sellers.

However, if a real estate agent is a seller's property (such as a renovated property), it may be subject to consumption tax.

More freedom and flexibility to renovate

When renovating interiors, you can customize wallpapers, fixtures, and other items to your preference.

Accents may be attached to one side of the walls, and renovations using natural materials such as lacquer, diatomous soil, and solid materials are also popular.

You can check the interior, views, and amount of sunlight

In the case of newly built condominiums, you can only guess as to what the actual interior and views will be based on the showroom and visiting the area and looking at maps. 

For pre-owned condominiums, you can check the indoor conditions, views, amount of sunlight, etc. of the rooms you will actually live in.

There is already a certain amount of repair reserve fund

In the case of pre-owned condominiums, since there is a repair reserve that has already been set aside for a certain period of time, repairs and other measures can be taken from the reserve fund in the unlikely event of a disaster.

In the case of newly built condominiums, we pay a lump-sum repair reserve when purchasing. However, repair expenses may be insufficient in the case of major disasters.

Be able to check the management status in advance

"Condominiums can buy management," but new condominiums cannot check future management conditions.

Some condominiums faced the risk that the consensus-building of residents would not be successful in negotiating a step-up in the repair reserve fund and would not be able to respond to future repairs.

In the case of pre-owned condominiums, they can check in advance the financial affairs of the management association and the operational status, such as the maintenance and management of buildings, the total amount of the repair reserve fund and the history of large-scale repairs.

Able to obtain resident information on neighboring housing units and upper and lower floors in advance

Although new condominiums have the aspect of making it easier for residents to build relationships because they start a new life at the same time, they have the disadvantage of not even knowing the family structure of neighbors until they begin living there. 

The most common problem in the neighborhood of condominiums is noise, but it is also more likely that noise problems will occur if there are large families in the neighboring units. 

The ability to know what kind people live in the neighborhood in advance can be a major advantage of pre-owned condominiums.

Disadvantage of purchasing pre-owned condominiums

In addition to the advantages, we will also look at the disadvantages.

Brokerage commissions

In the case of newly built condominiums, there are no commissions because the seller sells them directly. However, since pre-owned condominiums are distributed in the market, brokerage commissions paid to brokers are required.

Have a high reserve fund for repairs

Reserves for repairs of condominiums are generally provided in a step-up method, such as every five years, depending on long-term repair plans.

In the first place, the setting of the reserve fund for repairs at the time of sale is too low compared to the appropriate value, so for any condominium, the amount is increased in a few years after the new construction, which is higher than the general reserve fund for repairs of new condominiums.

However, it is very important to maintain the asset value of condominiums.

If necessary repairs cannot be carried out, the building will become increasingly obsolete.

Condominiums that have properly funded reserve repair funds are thought to be well maintained and have good management associations.

Recently, some condominiums have shifted from the step increase method, which requires consensus building every few years, to the equal reserve method recommended by the Ministry of Land, Infrastructure, Transport and Tourism (fixed amount after increase based on long-term repairs).

Tax incentives are not as good as newly built houses

In the case of new condominiums, there are tax incentives such as housing loan deductions, real estate acquisition taxes, and real estate taxes. However, in the case of pre-owned condominiums, such tax reduction systems are less adequate than those for new condominiums.

For condominiums built 25 years or older, there are certain restrictions on receiving mortgage deductions.

The layout is not to your liking

In the case of newly built condominiums, there is an array of different floor plans and price variations among the same condominiums, so you can select them according to your budgets and preferences.

In the case of pre-owned condominiums, your choice of floor plans is limited.

Be less resistant to earthquakes

Buildings that received building confirmation prior to June 1, 1981 are clearly distinguished in the real estate market as buildings under the Old Earthquake Resistance Standards.

If we have received an earthquake resistance diagnosis and have not carried out necessary reinforcement work, it may not meet the earthquake resistance standards of the current Building Standards Law.

Housing equipment may be old

In the case of older condominiums buildings, they may have windows of single panes with low thermal insulation effect, or the hot water supply equipment may be an electric water heater.

Most residential installations can be renewed by renovation, but many hot water systems and windowpanes cannot be changed.

People who are most suited to buying pre-owned condominiums

There are advantages and disadvantages to any property, but what kind of person is most suited to buy pre-owned condominiums?

Someone who likes to collect information

A large amount of information is available on the internet and marketing materials for newly built condominiums.

However, the information on pre-owned condominiums is limited, such as the distance from the nearest station, the price, floor plan, the specifications of the building, and the monthly expenses.

People who do not have difficulty collecting information on neighborhood shopping facilities, educational environments, ground strengths, disaster risks, and surrounding markets will be able to select pre-owned condominiums wisely.

People who want to know their neighborhood in advance

In the case of newly built condominiums, you won't know what kind of people will live there until they move in. 

In the case of pre-owned condominiums, we are able to gather such information from the seller, so it may be possible to avoid problems in the neighborhood as much as possible by learning what kind of people live in the neighborhood.

Senior citizens

The statutory "useful" life of reinforced concrete buildings is 60 years.

For condominiums built more than 40 years ago, some may undergo  reconstruction in the future. However, reconstruction may incur costs.

Because senior citizens may live in a condo for fewer years than younger citizens, the risk of rebuilding a condominium while they are living there is low even if they buy a pre-owned condominium.

In Conclusion 

Newly built condominiums and pre-owned condominiums have their respective advantages and disadvantages, and as a whole, one is not better than the other. 

In addition to living comfortably today, we also need a long-term perspective on maintaining asset value and costs.

Based on each feature, select a choice that fits your own lifestyle, budget and preferences.