Capturing Low Demand Through Long Time-On-Market: Functional Obsolescence and Owner Resignation Among Old Rental Houses

ABSTRACT

In Asian countries, including Japan, the rapid demolition and new construction of housing continues, causing demand for old housing stock to fall. Employing unit-level listing information obtained from a real estate portal in the Tokyo rental housing market, this study differentiates vacancies by time dimension and documents that old properties are likely to spend a long time on the market, exceeding several months. This low demand for old houses can be attributed to functional obsolescence (lack of contemporary housing amenities and services) and owner resignation (lack of adequate countermeasures to fill vacancies regardless of their effectiveness). Our results indicate that even in popular property segments and neighbourhoods at the macro level, low demand broadly arises among old houses and is not always socially inefficient. Moreover, accelerating early redevelopment may improve social welfare by avoiding older properties sitting on the market for long periods.

KEYWORDS:

• Rental houses
• vacancy
• time-on-market
• low demand
• Japan

Acknowledgment

We would like to thank three anonymous referees, Kenneth Gibb (the Editor), Chihiro Shimizu, and the members of the Recruit Co., Ltd. for their helpful comments and suggestions. This research was conducted when Masatomo Suzuki worked at Center for Spatial Information Science, the University of Tokyo, and Yuta Arai and Daisuke Yamato worked at Recruit Co., Ltd.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. The one-room housing type has a kitchen inside the living room/bedroom, whereas the 1 K-type has a kitchen outside the living room/bedroom.

2. The rental vacancy rate is defined here as the “number of vacant rental housing units” over the “number of occupied and vacant rental housing units”. The original data are available at: https://www.stat.go.jp/english/data/jyutaku/index.html (accessed April 18, 2021).

3. We excluded samples with missing information on certain variables or those with atypical values. The samples were restricted to properties satisfying all of the following conditions: monthly rent (including monthly administrative fee) is between 30,000 and 150,000 JPY; time on the market is below 365 days; property is less than 60 years old; walking time to the nearest train station is less than 30 min; floor space is between 10 m² and 120 m²; the estimated initial rent markup is between − 0.5 and + 0.5; and the ratio of final listing rent to initial listing rent is between − 0.5 and + 0.5. The sample size before cleaning was 323,338, of which 309,520 were included in our analysis.

4. For example, furnished properties (equipped with furniture) tend to be equipped with electrical appliances. Therefore, the “furniture” dummy captures the effect of having electrical appliances.

Additional information

Funding

This work gratefully acknowledges the support received from JSPS KAKENHI Grant Numbers 23K13464, 20K14896, 22H00065, and 20H00082.