Price premium of the collective management of condominiums: Evidence from Tokyo

Abstract

While the sectional ownership of condominiums leads to collective action problems, it has been unclear whether adequate condominium management practices are reflected in property values. This study fills this gap by investigating the price premium of the collective management of condominiums in the Tokyo metropolitan area, employing a novel dataset on the evaluation program for condominium-level management practices that started in 2022. We first found that properties with a higher overall management evaluation score exhibit higher transaction prices than those that have either achieved a low score or not yet been evaluated. The price premium is approximately 11% for properties satisfying 90–100% of the overall evaluation score than those that have not yet been evaluated. On the specific components of management practices, we then demonstrate that the “community-building” component, to which each resident is required to contribute more than the management company, contributes to the price premium. While newer condominiums experience price discounts due to a failure to establish systems as the foundation for future property management, older condominiums receive price premiums from achievements in property management. These results suggest that condominiums managed collectively through the contributions of each sectional owner are valued in the market for their long-term sustainability.