Is the Former Athletes’ Village of the Tokyo Olympics Part of a New Asset Bubble?
The most highly valued unit at the Harumi Flag development on Tokyo Bay was recently over-subscribed at auction by a record factor of 266!
What’s new: Bidding for the new condominiums or commonholds (apartments or flats for sale) at the Harumi Flag development on Tokyo Bay, the former site of the Athletes' Village for the Tokyo Olympics and Paralympics held two years ago, has reached a frenzied pitch. Some of the most sought-after units on the highest floors were over-subscribed by a record factor of 266, meaning that 266 separate bids were submitted for a single apartment.
Why it matters: Demand for new residential real-estate in Tokyo—especially for properties located in “tower mansions,” the English-like Japanese word for condominium in a high-rise building--has been increasing for the past several years. The city's skyline has been transformed by the construction of numerous high-rise buildings, including luxury residential towers. These towers often offer upscale amenities, spacious layouts, and panoramic views of the city. Demand for luxury residences in Tokyo, including “tower mansions,” has been influenced by various factors such as economic growth, urbanization, and the preferences of affluent individuals seeking prestigious living spaces. The demand for such properties has been on the rise due to the limited availability of land and the desire for exclusive and high-end housing options. The intense bidding wars underway at Harumi Flag may signal the development of a new asset bubble that may not be sustainable.
Driving the news: The Harumi Flag condominium complex stands on the site of the former Tokyo Olympic and Paralympic Village in the Harumi district of Chuo-ku, Tokyo. It includes 13 hectares (approximately 32 acres) of land that stretches along the Tokyo Bay shoreline, surrounded by the sea on three sides.
Harumi Flag will soon be transformed into a new “city within a city” of 12,000 residents. Buildings that once housed athletes are being renovated and transformed into 17 condominiums and 4 rental apartments.
Sales began in 2019, before the Games. At the time of the first phase, 600 of the 2,690 units were sold, and the average multiple per unit was 2.57 times, with the most popular unit over-subscribed by a factor of 71 (meaning 71 applications for a single property). Properties in corner units on the higher floors tend to generate more interest.
“I've never experienced such a high turnout.” – Sales representative who has collected a flood of new applications for apartments at Harumi Flag
During subsequent rounds of bidding the lowest subscription factor had increased to 35 times for rooms on the second floor, and the higher the floor, the higher the bidding multiple, with most of the corner rooms exceeding 100 times. During the latest round of bidding a few units were over-subscribed by a record factor of 266!
Context: Currently, condominium prices in central Tokyo are continuing to soar, with an increasing number of corporate-employed households buying properties priced in excess of 100 million yen (approximately US $720K). Keep in mind that units at the Harumi Flag development fall into a range of only 61.06m2 (657 square feet) on the small side to 106.57m2 (1,147 square feet) for the most spacious layout. Thus, we are not talking about very large spaces, although this size of apartment is not unusual in Japan. Most of these hot, new properties with such high asking prices are now called okusions (億ション), which is a newly made-up word in Japanese combining the Chinese character oku (億) that means 100 million and the second half of the Japanese term mansion (マンション), which means condominium.
What they're saying: During the seventh auction held in February 2023 the venue was filled with people from all walks of life, including families with small children, elderly couples, foreigners, and even businessmen in suits.
When reporters asked the first 10 or so people who had completed their applications why they wanted to buy, they all mentioned "low price.”
“It is undervalued compared to the surrounding market. No used condominium in Chuo Ward, which is considered one of the three central wards of Tokyo, has such a low price.” – 30 year-old single male prospect
“I wanted a new condominium, and when I looked into it, I found that this place was 20 or 30 million yen ($144K ~ $217K) cheaper than the surrounding condominiums. Considering the future asset value, that low price was very attractive.” – Prospective couple in their 30s
By the numbers. During this round of bidding the highest price was 230 million yen ($1.67 million) and the lowest price was 49.9 million yen ($360K). The average price for a unit in the 85m2 (915 square feet) range, which was the most commonly sold layout in this round of bidding, was 80 million yen ($578K). According to the sales representative, the unit price per tsubo (the area of two tatami mats = approximately 3.3 m2 = 35.6 square feet) was about 3 million yen ($21,664) or $609 per square foot.
Aside. That represents a real bargain compared to the average price per square foot of a Manhattan condominium during the first quarter of 2023, which was $2,119.
So what about condominium prices in the same Chuo Ward in the middle of Tokyo?
According to a private think tank, the average price of new condominiums sold during the last year, excluding the Athletes' Village condominium, was 103.65 million yen ($748K), or 4.96 million yen ($35,811) per tsubo, which converts to $1,006 per square foot. Thus, Harumi Flag does seem to be quite reasonably priced.
Furthermore, when compared to the prices of pre-owned condominiums in the surrounding area, Harumi Flag still seems cheap. A 14-year-old 80m2 (861 square feet) condominium next to the Athletes' Village in the same Harumi district was recently listed at more than 90 million yen ($650K).
Why so cheap. According to a sales representative from Mitsui Fudosan, one of the eight major developers involved in this project, the first reason cited was the somewhat inconvenient 20-minute walk to the nearest subway station. Another reason seems to be a desire to move a lot of inventory as soon as possible.
“We needed to sell the large number of units of the Athletes' Village within a certain period, but there are few examples of developments that supply such a large number of rooms. Even if we raised prices in line with market prices, there was a risk of many units remaining unsold if demand were to cool, given the uncertainty of future demand.” – On-site sales representative
While those may have seemed like valid reasons at some point, in retrospect it now appears as though a lot of money was left on the table.
What’s happening. The relative bargains at Harumi Flag would appear to be a golden opportunity for families that seek a beautiful new home in the middle of Tokyo, right? Wrong.
The below-market pricing only served to attract an abnormally large number of speculators—most of whom were representing corporate entities—that would bid on several condominiums at once.
“When we looked at the Athletes' Village apartments as an investment, we often asked for advice on which unit would give the best yield or be the easiest to resell. It was common for investors with funds to apply for 10, 20, or 30 units, and some were lucky enough to get more than one property.” – One of the bidders during the seventh round of the auction.
These people had no intention of living there. Their only intention was to flip the property as soon as possible for a hefty profit. Thus, the average individual bidder did not stand much of a chance.
A man in his 40s from another part of Tokyo said that he had applied for the lottery three times but was unsuccessful in all of them. He had hoped to live with his family in a quiet environment surrounded by the sea, but he was unsuccessful so many times that he gave up even applying.
The bottom line: Especially when viewed against the backdrop of the ever-growing inventory of millions of abandoned homes across the country, it is somewhat ironic that the buying frenzy at Harumi Flag has gotten so out of control. It is, however, a symptom of the larger problem of the perpetual concentration of resources in Tokyo, a phenomenon called Tokyo ikkyoku shuchu (東京一極集中) in Japanese. While the record rates of over-subscribed condominiums at Harumi Flag may be somewhat of an anomaly, they are an indicator that Tokyo’s residential housing market is likely to continue to become ever-more pricy at least for the foreseeable future.
Links to Japanese Sources: https://www.nhk.or.jp/shutoken/wr/20230216a.html and https://www.nhk.or.jp/shutoken/wr/20230202a.html
#tokyorealestate #harumiflag #olympicvillage #athletesvillage #apartmentflipping #speculation #億ション #選手村マンション #東京オリンピック #転売 #晴海フラッグ #湾岸エリア #東京一極集中
266 times subscribed compared with zero times subscribed for the 8.5 million akiya in Japan is a kinda crazy way to run a country, isn't it?!
Why have high rise condos seem to be popular again? I can understand that these particular condos are popular since they are relatively cheap but following Fukushima, I thought buyers became generally leery of high rise. Imagine how much you must shake and sway on the 39th floor compared to the 2nd floor in any regular building. And then walking up and down 78 flights of stairs to buy my tuna mayo onigiri lunch when the power is cut. No thanks.
There are tremendous views over expansive greenery available in Tokyo from modestly tall buildings of 12 stories and under. And with far better transportation access too. Admittedly, you don’t get the hotel entrance lobby look of the high rise condos but to each their own.