How building age changes 1LDK rental yield in Arakawa

Older homes have higher yields is only the beginning of the story. In Arakawa, median 1LDK rent falls about 17% between the newest and oldest groups, while the median purchase price falls about 49%.

Gross yield rises from 3.29% to 5.22%

For an Arakawa 1LDK aged 0 to 10 years, the median advertised rent is ¥151,000 a month and the median asking price is ¥54,800,000. The gross yield is 3.29%. Gross yield simply compares a full year of rent with the purchase price, before costs. For homes aged 41 years or more, the figures are ¥125,000, ¥27,990,000 and 5.22%.

The mix of homes differs between age groups. Gross yield is shown before costs.

Rent falls 17%, while the purchase price falls 49%

Between the two ends of the age range, monthly rent falls 17.2%, while the purchase price falls 48.9%. Because the price falls much more, the rent becomes larger in relation to the purchase price and the gross yield rises.

That does not mean every older home is automatically a better investment. Yield reaches 5.1% for the 21 to 30 year group, then dips to 4.37% for the 31 to 40 year group. The homes listed in each age group are not identical. Their size, location and condition also change.

Why is the 11 to 20 year group more expensive than the newest group?

The table shows a median asking price of ¥62.8 million for homes aged 11 to 20 years. That is higher than the ¥54.8 million median for homes aged 0 to 10 years. This looks strange if we expect every building to lose value at a steady rate.

The reason is that we are not following the same buildings for twenty years. The 42 sale observations in the newest group and the 57 observations in the next group refer to different homes. If the 11 to 20 year group contains larger homes or homes nearer a station, its median can be higher even though the buildings are older. The newest group may also contain more small homes aimed at investors.

So the five bars should not be read as a smooth depreciation schedule. They show a broad relationship between age, rent and price across the homes we could observe. They do not tell us the exact amount one particular home loses each year.

The number of observations changes how much confidence we should place in a bar

We have 1,904 rental observations for the newest group, but 145 for homes aged 41 years or more. Sale observations move in the other direction, with 42 for the newest group and 148 for the oldest group.

A group with fewer observations can move more when a handful of expensive or inexpensive homes appear. The 21 to 30 year group has only 29 sale observations, the smallest sale count in the table. Its 5.10% yield is interesting, but it is not enough to declare that age range the best investment. The counts beside the yield tell us how firmly to hold the conclusion.

Gross yield leaves out real costs

Older buildings can bring higher maintenance charges, repairs, vacancies, stricter loan terms and fewer buyers when it is time to sell. The 5.22% figure comes before all of those costs. A purchase decision needs a second calculation that subtracts running costs and allows for major repairs.

The owner may need to pay monthly building fees and reserve contributions for future repairs. Equipment replacement, work between tenants, empty months, property tax and insurance also reduce the income that remains. Gross yield is useful for a first sort, but it is not the money left in your bank account.

For a more realistic comparison, subtract regular costs and an allowance for empty months from annual rent. Then compare what remains with the purchase price and buying costs. Older homes deserve a larger repair allowance. This shows whether the apparent advantage survives after reasonable costs are included.

The comparison is still useful. It shows that buyers pay much more for a newer home, but renters do not increase their monthly offer by the same proportion. The price of "new" follows one curve for buyers and another for renters.

Tenants do not choose on building age alone

An older home can hold its rent when the interior has been updated, the station is close and the layout works well. A newer home can struggle to charge more if it lacks storage, faces noise or sits far from a station.

Tenants in Arakawa may care about the journey into central Tokyo, everyday shopping and usable space as much as the number on the building certificate. An investor may pay heavily for a newer building, but tenants will not always pay the same proportion for that newness. This difference helps explain why purchase prices and rents do not fall together.

Loans and future resale also change with age

An older home may have a lower purchase price but receive a shorter loan term or require a larger deposit. Higher monthly repayments can make the monthly result uncomfortable even when gross yield looks attractive. A 5.22% yield means something different to a cash buyer and to a buyer using a large loan.

Think about the age at the end of the planned holding period too. A home that is 41 years old today will be 51 after a ten-year hold. The next buyer's ability to obtain a loan, and the building's repair history, can affect how easy it is to sell. The calculation should cover the purchase, the years of ownership and the eventual sale.

Compare the rent curve and price curve together

When looking at an investment home, do not stop at the price by building age. Put rent for the same ward and layout beside it. Yield tends to improve where prices fall faster than rents. If rent falls just as quickly, an older home may not offer better income value.

A checklist for comparing real candidates

• Compare homes in the same ward with the same layout and a similar floor area.
• Allow for empty months instead of assuming twelve full rent payments.
• Subtract building fees, repair reserves, tax, insurance and work inside the home.
• If using a loan, include the interest rate and repayment period in the monthly result.
• Read the building's repair history and planned major works.
• Consider the building age when you expect to sell and whether a future buyer can obtain financing.

If the older home's advantage remains after these checks, the yield gap has practical value. If it disappears, the higher yield may simply be advance payment for costs and limits that arrive later.

You can make the same comparison for other wards in the building age and rental-yield tool.