Viral market

Delivery of bathroom fixtures from Asia has been delayed

Since consumption has declined precipitously during the CV19 crisis, it’s no suprise that the real estate market has suffered considerably. The Nihon Keizai Shimbun has obligingly looked into the particulars, which are mostly predictable but worth looking at in detail. The Nikkei reports that people have essentially stopped looking for new homes, though the effect hasn’t been sustained enough to cause prices to fall just yet; and, in a sense, it might be better if prices did fall a bit, since that would encourage people who may be sitting on the fence to jump off and sign a contract.

The main problem at the moment is that people who have already signed contracts are getting cold feet, even if it’s too late at this point. Nikkei says that more than a few realtors it talked to have said they receive requests from customers to “disinfect” the used condos they buy, thus placing the realtors in a difficult position. As one agent told the newspaper, he understood the sentiment but how exactly he was going to convince the customer that he had cleaned the apartment “to their satisfaction” was going to be a problem. For people who had already signed contracts, it wasn’t a primary issue, but for those who were about to sign, the agent’s response could prove to be vital to the sale. A number of realtors said that more than the usual number of price negotiations had broken down since the pandemic developed. Demand is quickly evaporating unless something happens soon to change the situation. Read More

The now and future isolated

A superannuated New Town

Around the time the central government finally decided to declare a state of emergency to get people to stay indoors and help halt the spread of the coronavirus, we wondered if anyone would mention our pet peeve—tower condominiums—as an ideal residential accommodation for self-isolating individuals in Tokyo. The problem with living in a metropolis during an epidemic is that most people reside in collective housing, which makes it more difficult to not come into contact with others if you decide to emerge from your apartment. Consequently, the closer you are to the ground, the more insistent the urge to get some fresh air. High-rise apartment buildings make it that much more difficult to leave one’s home, since it requires getting into an elevator, which is the worst environment in a pandemic—cramped and unventilated—in order to come and go. So in a sense people who live in high-rises are already isolated to a certain degree, since, in our own experience as tower dwellers, such residents require more energy and initiative just to get out the door.

Novelist Jin Mayama doesn’t make this exact point in his essay for Asahi Shimbun that appeared April 18, but he comes close. He acknowledges that families will be trapped inside together for an indefinite period of time and hints that people in high-rises will be more stressed out owing to the cramped conditions. However, he sees this as a kind of opportunity, not so much for the residents, who are mostly stuck with their lot, especially if they bought their apartment, but rather for the rest of us who don’t live in high-rises. The epidemic puts the future of tower condominiums in a new light, or, maybe it would be better to say, a new shade.

Mayama predicts that the lot of tower condos will be strikingly similar to that of New Towns right now, which is that the latter have essentially become “slums.” Most of Mayama’s explanation mirrors what we’ve talked about at length in this blog, but it’s worth going through again for the sake of clarity. Collective housing is still a fairly recent trend in Japan, since it wasn’t anywhere near the norm, even in cities, before World War II. To him, the idea of collective housing as a social trend really took off in 1955, when the central housing authority started planning New Towns, which were based on a British idea but, physically, resembled Soviet apartment blocks. The New Towns were broadly covered by the media as being futuristic and progressive, and were instrumental in creating what was called “new families,” which, to Westerners, were basically nuclear families. Extended families, which had always been the norm and ideal in Japan, didn’t fit the new housing plan. Moreover, the New Towns epitomized the government’s drive to create a “100 million-strong middle class.” Read More

Harumi Flag at half-mast

One of the many negative economic by-products of the unavoidable decision to postpone the 2020 Tokyo Olympics for a year is the fate of Harumi Flag, the condo development project attached to the athletes’ village that was built on landfill in the Tokyo waterfront area. It was widely believed that the Olympics would produce a real estate bubble, but the coronavirus epidemic may have already prematurely burst that bubble. Harumi Flag will feature condominium towers, as well as schools and retail outlets to serve the large community that will be moving in after the games. The condos will eventually contain some 5,600 units and, in all, they are expected to attract more than 20,000 tenants, including renters. The entire area will cover the equivalent of three Tokyo Domes. Eleven developers are working together on the project headed by Mitsui Fudosan Residential.

For buyers, the complex has two attractions, according to a February article in Money Post: bragging rights that the units were once used by Olympic athletes, and cheaper prices. The average price of a new condo in the 23 wards of Tokyo is ¥80 million, which is about the same as it was during the bubble period of the late 80s. The median price of the 85 square meter units that went on sale earlier this year was ¥64 million. One real estate professional told the magazine that, per tsubo (3.3 square meters), the Harumi Flag units are 30-40 percent cheaper than new units in surrounding complexes. And a new 85 square meter unit in central Tokyo would go for ¥100 million at auction. A Tokyo municipal government researcher said that this may be the last chance to buy a new condo with the “big three” advantages—central location, large floor area, and affordable price. It’s the best place if you work in central Tokyo, and the schools will be very good.

Another attractive feature of the complex is that, because it is being built for Olympic athletes, the common areas are spacier and more comfortable. In particular, the elevators are larger. However, the negative points that have been pointed out are specific to the kinds of lifestyles of people who are buying the units. For one thing, transporation is not convenient. The nearest train station is Kachidoki on the Oedo Toei subway line, 20 minutes from Harumi Flag on foot, not counting the time it takes to get from one’s apartment to the ground floor by elevator. Mitsui says that there will be exclusive tandem buses operating between Harumi Flag and Toranomon during rush hour using a special lane, but until it actually starts it’s difficult to gauge how fast and convenient the buses will be. Given the density of the living conditions in the towers and the fact that they plan to operate twelve trips a morning with buses that hold a maximum of 40 people, they may not be enough. For that reason alone, one real estate journalist told Money Post that Harumi Flag is attracting few people who buy property as investments, since, in Tokyo at least, they usually aren’t interested in any apartment that is more than 10 minutes from a station. The same writer says that the initial Olympic legacy hook won’t mean anything ten years down the line in terms of resale value. Read More

Empty nest syndrome

Occupied house undergoing a Sumitomo makeover

A Kyodo news report carried by the March 18 issue of the Tokyo Shimbun clarified an important point in the discussion of abandoned or otherwise empty homes in Japan, vernacularly referred to as “akiya.” According to a survey of 700,000 properties throughout Japan conducted by the Ministry of Internal Affairs and Communications, 46.4 percent of akiya are at least 50 years old. Moreover, among the reasons given by present owners for not having unloaded the properties or demolishing them, 52 percent said they had inherited them or received them as gifts and, essentially, didn’t know what to do with them. As years passed, neglect took its toll, and in many cases if not most, the homes, especially if they are single-family houses, have become uninhabitable.

Five years ago the central government enacted a special housing law that would compel local governments to manage vacant properties more proactively. According to Kyodo, the government is now going to “check the effectiveness of the law” in order to see whether it should be revised or supplemented. As of October 2018, the last time the land ministry released findings from its national housing and land survey, which it conducts every five years, the number of vacant homes stood at 8.489 million. That includes apartments and condos that have not been occupied for at least one year. According to the government, there are 12 percent more akiya than there were when the survey was conducted in 2008. In addition, 14 percent of all homes in Japan right now qualify as akiya, and the ministry estimates that 40 percent are “abandoned,” meaning they are permanently unoccupied. Last year, Nomura Research Institute projected that by 2033, the number of akiya would increase to 19.55 million, or 30 percent of all homes in Japan.

In a related story, Nikkei Business Daily’s March 15 edition explained Sumitomo Realty and Development’s new project to exploit vacant single-family houses. The project accepts orders for renovations of derelict houses in order to turn them into share houses (i.e., homes with multiple residents who share common spaces), minpaku (guest houses or airbnb properties), or social welfare facilities. Sumitomo has a lot of experience in the home renovation business through its Shinchiku Sokkuri-san brand home “reform” service. “Shinchiku sokkuri-san” roughly translates as “making an old house look just like a newly built one.” Since the service started in 1996, Sumitomo has renovated about 130,000 houses, and is now working on expanding the business to include renovations that turn old single-family houses into share houses or guest houses.

Sumitomo’s target with regard to akiya are wooden houses, which number about 2.39 million. The land ministry says that about 480,000 akiya in Japan that are judged to be easily renovatable are also located within one kilometer of the nearest train station, making them easily sellable after going through the reform process. Last year, the government relaxed the building standards law so that usage of a structure could be changed more easily, for instance from residential usage to commercial usage. Consequently, Sumitomo wants to turn some of these old family houses into airbnbs or share houses or even restaurants/cafes. Sumitomo, in fact, projects that its revenues for reform business will amount to ¥123 billion in fiscal 2020, a 6 percent increase over fiscal 2019. So there may be some life in those old empty houses after all.

Slipping away

That first step is a doozy: First world elderly problems.

Here’s a fairly common retirement strategy: The kids are gone and have families of their own, so the house you bought so long ago and which is likely paid for by now becomes too big, so you sell it and use the money to buy a condo somewhere in or near an urban center where public transportation and retail resources are easy to access. However, a recent feature in the weekly magazine Shukan Gendai warned people who are thinking of doing this to think twice. It may not be as easy as you think, and, in fact, it could end up being a disaster.

The number of people in Japan over the age of 65 recently exceeded 35 million, an expanding demographic that has become a target for real estate agents who are selling used or new condos, which tend to retain their value more readily than single-family homes. As it stands, many of these new retirees probably live in single-family homes in the suburbs of large cities to which the heads-of-household used to commute. These houses are likely two stories, a structural feature that becomes more of an inconvenience the older you get, and they are also probably far from public transportation hubs, meaning the people who live in them require a car to get around. Realtors use such reasonings to convince people to sell their homes and buy condos, and it makes sense, but not as much sense as it used to. First of all, there are just too many single family houses on the market and not enough people who want to buy them, and that disadvantageous ratio will only get worse as the population greys further.

Gendai also brings up the magic amount of ¥20 million, which is what a retired couple should have in savings to supplement their pensions. Actually, ¥20 million is probably not enough unless the couple is able to invest in some kind of financial instrument that can guarantee a small income, but most people still have their savings in time deposits, which generate almost no income, so the thinking here is that the couple lives off their pensions and doesn’t touch their savings since they may need it for emergencies. It’s a precarious way to live. Read More

Alone again, naturally

Public housing complex run by Saitama Prefecture

Low income public housing is available in Japan through different levels of local government, either prefectural or municipal, though some larger cities also have public housing run by wards (ku). In almost every situation, however, the applicant, traditionally, has to have a guarantor, ostensibly as a backup in case the tenant is unable to pay their rent. Obviously, because public housing is only available for people of limited or no income, coming up with a guarantor could pose a problem, since it’s entirely likely that the applicant does not have anyone, meaning relatives, they can lean on for such support. In Japan, welfare authorities do not extend public assistance to applicants without first making sure that the applicant cannot tap a close relative for such assistance. It’s one of the uses of the koseki (family registration) system. Once it is understood that the applicant has no relation they can turn to, then welfare officials grant assistance. Of course, this isn’t a universal requirement—as with most bureaucratic processes, it’s up to the individual official—but it’s enough of a protocol to make applying for assistance difficult for many, and when it comes to housing, guarantors are thus required. Usually, officials insist on relatives, since they are more likely to honor the contract.

Now, apparently, some local governments are facing up to reality. An article in the Jan. 20 Asahi Shimbun reports that an increasing number of local governments are eliminating the guarantor requirement for public housing. Asahi Shimbun apparently carried out its own survey and found that 13 major cities in eight prefectures have waived the requirement, and the newspaper predicts that many more will follow.

According to the land ministry, in 2018 1,674 local governments provided public housing, and of these 366 reported cases where applicants were rejected because they could not provide guarantors. This problem is becoming more acute with the aging society, since single elderly people without means are less likely to have living relatives who can vouch for them. Consequently, the land ministry itself some years ago started sending out notifications to local governments to remove guarantor requirements. In the end, of course, it is the local government’s decision, but since the central government subsidizes welfare assistance, many local governments have taken the notification as a kind of directive. Read More

Am I high?

Tower condos in central Kobe

Local governments are starting to realize the disadvantages of tower condos and doing something about it. According to a Jan. 3 article in Tokyo Shimbun, last July the city of Kobe implemented regulations that would limit construction of new condominium complexes in the city center. As mentioned in a previous post, last fall’s kanto area typhoons brought home to the residents of at least one tower condo in Kanagawa Prefecture the truth that high-rises were especially vulnerable to storms in ways residents hadn’t counted on. Western Japan has had more immediate encounters with typhoons in recent years, and that seems to have been part of the reason for Kobe’s new regulations, though the main impetus may be purely economical.

The new law covers land to the south of Sannomiya Station. For the 22 hectares closest to the station, all new residential construction, including single-family houses, has been banned. Then, in the surrounding area, for any plots of land that are 1,000 square meters or more in size, the capacity rate for new residential construction is limited to 400 percent. That means, for instance, if a building with a footprint of 500 square meters is built on these plots, it can be no taller than 8 floors. Tower condos are defined in Japan as being at least 20 floors, and usually they contain at least 100 units. Currently, Kobe has 69 high-rise condos, 24 of which are located in Chuo Ward, which is where Sannomiya Station, the main transport hub, is situated.

One of the reasons for these restrictions is that the city can’t provide all the services required for tower condos. The trend at the moment is for younger people to move as close to city centers as possible so as to be nearer to their jobs. They are willing to pay for such proximity because they understand, having grown up in the suburbs watching their fathers commute two or three hours a day to and from work, what that commute does to their lives. And a lot of these young people have families, but Kobe can’t provide enough schools in the city center. At the moment, in fact, many existing schools in the area have had to provide prefabricated classrooms off-site, because there is no land left in the city center to expand schools or build new ones, and one of the reasons is that there are so many tower condo complexes taking up room. For the same reason, there aren’t enough stores or other commercial facilities and, most significantly, there is a paucity of employment, which means, ironically, that the city center has become a kind of bedroom community for surrounding areas, including Osaka. Read More

Help the rich

The Japanese government expects 40 million foreign tourists in 2020, which would be a new record. Obviously, many of these people will be coming for the Olympics, but the government seems to think this wave with money to spend is going to be a regular and permanent thing, and they want to be prepared for a future where such people feel welcome. Legalizing casinos is part of this vision, but that plan was mostly formulated before the current foreign tourist boom was confirmed, and, in a real sense, the so-called integrated resorts that are being planned as excuses to allow casino gambling may not be as necessary as they once seemed, but it’s too late to stop now.

You can’t have too much for rich people to do, so the latest plan, reportedly the brainchild of Chief Cabinet Secretary Yoshihide Suga, is to build 50 luxury hotels by the mid-2020s. Why luxury hotels and not just regular hotels? Why 50? So far, nobody has really clarified the reasoning behind this ambitious scheme, but in the end the biggest unasked question is: Why the government? Japan is a resolutely capitalist country, reverent to the invisible hand of the market. And while Japan has been jokingly called the most socialist liberal democracy in the world owing to its schemes to game the economy through elaborate spending plans (which invariably help political vested interests), the idea that they would blatantly come up with such a concept to lure rich foreigners seems almost funny.

Some media are saying the scheme was suggested by David Atkinson, a former Goldman Sachs analyst and advisor to the Japan National Tourism Organization who has been promoting inbound tourism for years as a solution to Japan’s fiscal woes. In the interviews Atkinson has given over the years, he doesn’t mention luxury hotels exclusively. He mainly says that Japan needs more rooms of a less traditional sort—fewer ryokan and onsen inns and more conventional Western style hotels where foreign guests can feel comfortable and make their own plans. The trouble with traditional Japanese accommodations is that they tend to take the guesswork out of everything. You eat what they serve you when they serve you and even tell you when to go to bed. Read More

We’re on Twitter!

We recently opened a Twitter account under the catforehead moniker. The Twitter handle is @catforehead1. We will use it to tweet links to English or Japanese articles and other items on the internet related to housing in Japan. Please follow us and tell your friends about it. Part of the reason for starting a Twitter account is to attract more attention to this site as we look for a publisher for our book. If anyone could help us in that department, please feel free to contact us through this blog or through the Twitter account. Thanks.

Notes from underground

One of the older neighborhoods in Inzai without utility poles.

In recent weeks, we heard that the city where we live, Inzai in Chiba Prefecture, has become notorious for something. This has happened before; in fact, it’s happened several times. Though Inzai is about as nondescript as a Tokyo suburb can be, it occasionally pops up on the news for some reason or another. Earlier this year we were the butt of jokes because of a PR video produced by the city that had gone semi-viral because of its conflation of the name “Inzai” with the word “Indo,” which is the Japanese pronunciation of India. The video, fashioned after a low-budget Bollywood production, featured Indian tourists supposedly flocking to Inzai because they somehow mistook the city for their home country. Yeah, it deserved all the derision it attracted, and not just for the bad humor. More often, however, Inzai gets cited as one of the most “livable” cities in Japan for reasons we’ve talked about before and don’t need to get into again.

This latest blast of fame apparently originated on the prime time TBS information program “Newscaster,” which ran a mini-feature during its “7 Days” weekly review segment in September about all the homes on the Boso peninsula that had lost electric power during and following Typhoon Faxai. The main problem was that the strong winds blew over utility poles, many of which were in poor condition due to neglect. Because of all the work involved in getting utility lines back up, some sections of Chiba Prefecture didn’t have power for more than two weeks. In order to illustrate what could be done in the future to avoid such disasters, TBS visited Inzai, where a lot of new single-home construction is currently taking place. They went to one development near Inzai Makinohara Station on the Hokuso Line, the same station we use, because this neighborhood did not have utility poles. All the electrical cables are underground. Burying cables is the norm for most of the developed world, but Japan is way behind. In Tokyo only 8 percent of cables are buried; in Osaka only 6. In Hong Kong, London, and Paris all the cables are underground. Read More