The real estate industry, fearing falling sales and stock prices, is criticizing the request from Tokyo’s Chiyoda Ward to prohibit the resale of newly built apartments for five years.
The companies are demanding clarification of the rationale and purpose of the request.
In a document released on July 18, the ward called on the Real Estate Companies Association of Japan to include a “special provision” in sales contracts for apartments built as part of publicly funded redevelopment projects to stipulate they cannot be resold for five years.
The ward cited complaints from residents about excessively high property prices as a reason for its request. It said an increase in speculative transactions would make it impossible for people who genuinely wish to live in the ward to find housing.
About five redevelopment projects in the ward are affected by the request.
Although the ward’s request is not legally binding, stock prices of major developers sharply fell after the announcement on speculation that the move could dampen new apartment sales.
“To what extent can this be regulated under the law?” Junichi Yoshida, president of the association, asked at a news conference in late July.
Questions have been raised on whether banning such resales could infringe on personal property rights as well as private rights.
Yoshida indicated the association will continue discussions with the ward and call for a further explanation.
A senior official of the association attributed the soaring property prices to rising costs for materials and labor, as well as growing housing demand.
“We also believe short-term resale is undesirable,” the official said. “But we feel that the ward’s request lacks a solid foundation.”
The official added that the industry currently has no feasible measures to implement in response to the request.
According to the Real Estate Economic Institute, the average price of a new apartment sold in Tokyo’s 23 wards in July was 135.32 million yen ($920,000), a 24.4-percent increase from a year earlier.
Article 579 of the Civil Code stipulates that if a “special provision” is agreed on in advance, the seller of a property may rescind the sale by refunding the purchase price and contract-related expenses paid by the buyer.
Some apartments have included resale restrictions.
For example, Sumitomo Realty and Development Co. has attached a buyback provision to the 878-unit Grand City Tower Ikebukuro in Tokyo’s Toshima Ward and the 239-unit City Towers Itabashi Ohyama South Tower in the capital’s Itabashi Ward, requiring its approval for resale within five years.
The company told The Asahi Shimbun that the clause is intended to prevent purchases for speculative purposes because these properties are part of redevelopment projects with significant public interest and social value.
A similar provision is in place for the 768-unit Makuhari Bay-Park Rise Gate Tower in Chiba, being sold by Mitsui Fudosan Residential Co. and other companies.
However, Sumitomo Realty and Development acknowledged challenges in enforcing the buyback provision. The company may have to file a lawsuit unless it can secure the understanding of the owner and the prospective buyer in a resale.
An official of a major developer said once ownership is transferred to the buyer, it will likely become impossible to manage transactions in detail.
“It is hard to draw a line to determine whether a sale is speculative,” the official said, adding that some people may need to sell due to unforeseen circumstances, such as job transfers.
Yasuhiko Nakajo, dean of the Faculty of Real Estate Sciences at Meikai University, said these special provisions are the best response available at the moment, but they cannot fully resolve the issue.
Noting that resales are limited to apartments in certain areas of central Tokyo, Nakajo said, “If the goal is to stop speculative resales, authorities should designate specific areas and intervene with binding power in development planning and resale regulations.”
However, he cautioned that prices of existing properties will rise in surrounding areas if such measures discourage development and reduce the supply of new apartments.
(This article was written by Masashi Kisanuki and Yoichiro Kodera.)
by Dapper-Material5930