On Mar. 18 the land ministry released its latest list of property values throughout Japan. For at least two years running land prices, both for residential areas and commercial areas, have been dropping nationwide. Of the approximately 27,000 localities checked only 7 recorded any increase in land values. Though the government says the economy continues to show signs of recovery, property values remain stagnant, which means the economy can never recover fully.
The average price decrease for residential areas was 4.2 percent. The drop in the same period a year ago was 3.2 percent. Similarly, the drop for commercial land was 6.1 percent compared to 4.7 percent a year earlier. The drop for commercial land was even steeper in the three metropolitan areas of Tokyo, Osaka, and Nagoya: about 7.1 percent. This greater drop was blamed on a mini-bubble for commercial property in some areas of Tokyo in 2006. Read More
The latest statistics from the Ministry of Internal Affairs and Communications confirms that the number of rental property vacancies is growing. Nationwide there are some 17.7 million rental units, of which about 4.1 million are unoccupied. That’s a vacancy rate of 23 percent.
In Tokyo things aren’t quite as bad, but they’re bad enough if you’re a landlord. The vacancy rate in the capital district is about 16 percent. The highest vacancy rate in the country is in Fukui Prefecture, where it’s a whopping 44 percent. (Fukui’s neighbor, Toyama Prefecture, is famous for having the highest percentage of home ownership in Japan).
You don’t have to be Paul Krugman to understand the reason. The population is dropping and there’s a glut of properties, but as one consultant recently told the Asahi Shimbun the statistics may have a chilling effect on investment. Lately, realtors and developers have been pushing people with money to buy rental properties as an investment since interest rates have been impossible low for more than a decade. But without the promise of tenants such investments won’t provide much in the way of returns. People with money are going to have to find something else to do with it.
In a recent letter to the editor of the Asahi Shimbun a landlord told the story of an elderly tenant of his. The woman was an acquaintance of his mother who lost her apartment when the building she lived in was demolished. She was living on welfare and the letter writer’s mother offered her one of the smaller apartments in her building at a lower rent than normal, presumably as a favor to an old friend. She didn’t charge her a deposit or any gift money.
Eventually, the tenant died, and the landlord could not locate any close relatives. All her worldly possessions were in that apartment. His mother called the local authorities, who told her that when a person receiving public assistance died the cremation costs would be borne by the local government, but as far as disposing of the deceased’s possessions, that was the responsibility of the property owner. And since the mother had not asked her friend for a deposit and she had no savings, they would have to dispose of the effects and clean the apartment with their own money. (As it happens, the tenant was in the hospital for the last several months of her life and was unable to pay her rent during that time also.)
In the end, the man wrote, he paid around ¥150,000 out of pocket to clean up the apartment, which doesn’t sound like very much, but without a system to address such situations, it’s likely that landlords are not going to rent properties to elderly people of little or no means since they might get stuck with a huge cleaning bill if the tenant dies suddenly. And who can blame them?