Technical Report Aging and House Prices: The Impact of Aging Housing Stock to Housing Market in the Tokyo Metropolitan Area

SHIMIZU, Chihiro  ,  NAKAGAWA, Masayuki

2018-02 , Graduate School of Economics, Hitotsubashi University
Based on an analysis of the housing market, this paper focuses on external diseconomies of aging condominiums. It is possible that the quality of condominium stock deteriorates over time more rapidly than does that of ordinary housing. This deterioration in quality leads to a reduction in the quality of housing services received by residents and, further, this worsening of the residential environment may lead to external diseconomies. We run hedonic models to identify the external diseconomies of aging condominiums on the residential market. The results of our estimated models indicate that such external diseconomies for detached housing occur in areas where detached houses and condominiums coexist, and these exert a downward pressure on prices. Detached housing prices are lowered by around 3.2% for each 1% increase in the proportion of the total building floor area in neighborhoods in which condominiums were built before 1990. In other words, we can state that aging condominiums begin to generate diseconomies in their vicinities around 20 years after they were built.

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