Material Costs and a 40-Firm Bid-Rigging Case Squeeze Condo Repair Funds
- Prices and lead times for exterior coating, waterproofing and sealing have risen together, pushing up quotes and driving smaller contractors out.
- In June the Japan Fair Trade Commission found more than 30 contractors and two design consultants in the Kanto region in breach of the antimonopoly act - about 40 firms in total, with surcharges of roughly 1.6 billion yen.
- On 28 July the investigation widened to Aichi, Gifu and Mie, with on-site inspections at more than 20 contractors and consultants.
- Buildings supplied in large numbers during the 1970s and 1980s are now reaching their third major repair cycle, always the most expensive one.
- Before buying a resale unit, read three documents: the repair reserve balance, the long-term repair plan, and how the last project was tendered.
If you own a resale apartment in Japan, or are shopping for one, this story sets how much you will pay every month for the next decade. Large-scale repair work on Japanese condominiums is being squeezed from two sides at once, and smaller contractors are walking away.
One side is cost: prices and lead times for exterior paint, waterproofing and sealant have risen together, labour is short, and bids have followed. The other side is trust. In June the Japan Fair Trade Commission moved to issue cease-and-desist orders against more than thirty contractors and two design consultancies over bid-rigging across more than a hundred repair projects in the Kanto region; roughly forty firms were found in breach in total, with surcharges of about 1.6 billion yen. From 28 July the inquiry widened into Aichi, Gifu and Mie. Owners now face higher bids and cannot tell how much of the increase is cost and how much was arranged.
Repair cycles run twelve to fifteen years, so buildings supplied in the 1970s and 1980s are entering their third and most expensive round, at the top of a materials cycle, with fewer bidders to shop between.
The likely outcome is higher monthly reserve contributions, which come straight out of rental yield. Deferring the work only converts the cost into a discount at resale.
Before buying: read the management association's disclosure report, compare the per-square-metre reserve against the ministry's guideline, ask when the last major repair was done, and read the meeting minutes. A building whose owners have voted to raise reserves protects value better than one with deceptively low fees.