condos & apartments | Cat Foreheads & Rabbit Hutches

Reform or Die

Here’s another chapter from our unpublished book about housing in Japan based on our own experience of buying/building a home. This one is about keeping up properties.

One of the most popular sub-genres of reality TV is the home improvement show. In 2002, Japan’s Fuji TV launched one called “Before/After,” where superannuated, usually cramped properties were magically transformed into marvels of modern design. The producers hit on a fool-proof hook for the show that they exploited successfully week after week, year after year, without seeming redundant.

People with properties they wanted to fix up would contact the producers, who sift through the candidates, looking for the most broken-down or unusual cases. The best sequences highlight houses that would seem impervious to improvement due to their state of disrepair or local environment. A surefire hit is always the hovel located in one of Tokyo’s warren-like residential areas, usually dating from just after the war, when neighborhoods were constructed on the fly, and which require not just ingenious design skills to improve, but superhuman feats of logistics, since there usually isn’t any room to get heavy machinery to the property owing to narrow alleyways. The architects are lone wolves who waive their design fees and charge only for materials and labor. The recipients of their largesse come up with a ceiling amount they will pay, thus adding another layer of challenge to the architect’s task. The family is then sequestered off-site while the work is done and documented in detail by a film crew. The residents are not allowed to view the property until the “reform” is complete. The climax is dramatic, with the family entering the sparkling new house with tears streaming down their faces and the anodyne voice of the female narrator showing us the stark differences achieved by the architect.

“Before/After” sparked a boom in home improvement TV shows but not in home improvement–or, at least, not to the extent that it made a difference in the marketability of older homes. One of the main problems with remodeling in Japan is lack of regulation and oversight. The vast majority of homeowners can’t afford the kind of architects featured on “Before/After,” but anyone can start a home improvement company. In the past, the biggest complaint with regard to remodeling was fraud, characterized by operations that over-billed elderly people for poor work. Eventually, the complaints became more general owing to greater demand by homeowners who decided it was cheaper to renovate their present houses than it was to buy new ones, even if that wasn’t necessarily the case. In 2011, the Center for Housing Renovation and Dispute Settlement Support addressed more than 4,500 claims, mainly in Tokyo. In most cases there were no contracts, design plans, or even written estimates. If a particular job costs less than ¥5 million, according to the law, the company that carries it out doesn’t have to be registered as a construction firm, though remodeling companies are supposed to be insured for shoddy work. Also, the work doesn’t need to be inspected by the relevant authorities unless “it affects the integrity of the structure.” Some years ago a Nagoya woman whose condo became virtually unlivable after a reform company replaced her floors and windows couldn’t sue because there was no contract. The National Consumer Affairs Center of Japan handled more than 13,000 reform-related complaints in 2011, or twice as many as in 2010. Since there were no regulations, the center urged homeowners who were going ahead with remodeling to record all conversations. The Japan Bar Association in April 2011 urged the construction ministry to pass new laws to cover the industry, no matter how small the company.

When it comes to home improvement, experts recommend hiring designers who understand the engineering aspects of a remodeling project and can subcontract the various jobs to tradespeople. Such projects, however, can run into the tens of millions of yen, which is why comprehensive discount remodeling companies have sprung up, offering total renovations for much less. Many are associated with major retail home improvement centers, and are thus deemed to be reliable. They cut costs by buying materials in bulk, which usually means limited choices for the consumer. As with anything, you get what you pay for.

But most homeowners in Japan don’t renovate in any substantial way, because they’re not conditioned to think of their properties as an investment. And until very recently, there were no government incentives to improve properties. The idea that one’s house, as opposed to the land it sits on, accrues or even retains value over time isn’t widespread in Japan, so as long as people can put up with the wear and tear, they let their houses slide. So the question becomes: Do the houses not retain value because people don’t keep them up? Or do they not keep them up because they believe their houses don’t retain their value? In any case, the majority of used houses, especially those built before, say, 1990, are virtually junk.

Condos can be akiya, too

Posted on January 4 by catforehead

Reviewing our posts on this blog for the past year or so, we noticed that much of our writing is related to akiya, or vacant housing, which has become an increasingly visible problem that the media is finally addressing. However, when we look at the statistics, we notice that akiya are not limited to single-family houses, which is usually how the problem is framed in the press, but, in fact, is mostly comprised of apartments and condominiums.

The reasons for this lack of coverage may have to do with the fact that the image of apartments is that they are rented out, while the image of akiya is that of abandoned properties, so it’s difficult to imagine an apartment that temporarily does not have a tenant to be permanently vacant. However, condominiums are a different story since they are bought and sold, and for the most part when the press talks about the condo market they only talk about Tokyo, where apartments and condos are still in demand, even used ones.

But we found an article that appeared last spring in the business magazine President that covered vacant condominiums in depth, and, apparently, the situation is as dire as it is for single-family houses, even if the problem isn’t as visible.

The article quotes a number of experts, including an economics professor, Hiroaki Miyamoto, who says that in ten years one out of every four housing units in Japan will be vacant, and that the majority will be collective housing units, meaning condos or apartments. The main reason will be the lack of funds available to carry out long-term repairs and renovations on older buildings, which, as a result, will fall into disrepair and become not only difficult to sell, but in many cases uninhabitable.

To the international finance community, Japan is already considered a “pioneer” in the onset of permanently vacant properties, especially after the IMF conducted a study of the phenomenon in 2020. The outcome of the study was that vacant properties bring down property values in the communities where they are, and thus adversely affect regional economies.

As we’ve noted a number of times, the Japanese government carries out a large-scale survey of the housing and land situation every five years, and according to these surveys the gross number of housing units in Japan continues to increase even as the population has leveled off and started to decrease due to the birth rate. In 2018, the last time a report was released, the number of housing units stood at 62.4 million, while the number of households was 54 million, meaning that there is a 16 percent excess of housing units.

Until 1963, the number of households in Japan exceeded the number of units, but this ratio reversed in 1968 and ever since the number of units has continually increased in relation to the number of households.

Moreover, 85.9 percent of households in Japan, or 53. 6 million, contain full-time residents, meaning that 8.79 million units, or 14.1 percent of the total, contain no residents, and almost all of these are defined as “vacant” by the government—8.49 million, or 13.6 percent of all housing units. A property’s “vacant” status depends on how much or often it is used. In that regard, the portion of vacant properties has been increasing since 1988, when the vacancy rate was 9.4 percent.

President cites the methodology of the National Social Welfare Population Issues Laboratory, which has determined that the number of households in Japan will peak at 54.19 million in 2023, which also happens to be the year when the government releases the results of its latest housing survey. From now on the number of households will drop, and by 2040, the laboratory predicts the number of households will be 50.76 million, or 3.24 million less than it was in 2018. Extrapolating this trend further, the number of akiya will invariably continue to increase at an accelerating rate; that is, unless more properties are demolished.

As it stands, the number of demolished properties is also accelerating. Between 2008 and 2012, the number of homes demolished was 30 percent of the number of new homes that were built. Between 2013 and 2017, this portion increased to 62 percent. Nomura Research used this statistic to predict the vacancy rate for the future. If the 2008-2012 rate of 30 percent is used, the vacancy rate will be 25 percent by 2033 and 31 percent by 2038, but if the tendency shown in the change in the rate through 2017 is used, the vacancy rate will be 18 percent by 2033 and 20.9 percent by 2038.

So while the vacancy rate will continue to increase, it could slow down if the rate of destruction of superannuated properties increases as well, but that isn’t a given, since new home construction isn’t slowing down appreciably.

Mind the gap

Posted on December 10 by catforehead

*Yours in exchange for your first-born male child*

Tokyo real estate has become even more expensive, though it should be noted that it’s still reasonable when compared to other large cities in the world. An article that appeared Dec. 7 in the Tokyo Shimbun cited a survey about luxury condominiums where the price of a representative example in trendy Moto Azabu was pegged as the standard. If the Moto Azabu condo price is set at 100, then the price of a comparative condo in London is 181 and one in Hong Kong 218. (Masako: “And even with a luxury condo in Japan, you still get only one toilet.”)

Tokyo isn’t as expensive as most foreign media think it is, but even disregarding the usual markups for properties designed for so-called expats, condominiums in the capital are still out of reach for the average worker, and have become more so since the advent of the pandemic. According to the same Tokyo Shimbun article, the average price of a new condominium in the 23 wards in October exceeded ¥90 million. For sure, after COVID hit, more people decided that if they could telework, they’d rather live outside of Tokyo, but that didn’t really put any downward pressure on prices in the city center, which are not only popular, but extremely popular among rich people, the only socioeconomic layer that has seen an appreciable rise in income in recent years. In 2021, the average price of a new condo in the 23 wards went over ¥80 million for the first time since the bubble era, and in October the average was ¥93.65 million.

The main reason has less to do with COVID than with the Bank of Japan, whose president, Haruhiko Kuroda, implemented his infamous money easing policy when he assumed his position ten years ago. Since then, most of the cash that the BOJ has pumped into the money supply has ended up in the accounts of the very well-off, and they’ve used it to buy expensive property, thus pushing up prices across the board, but mainly in the high-end market. Add to this pressure the construction crunch that accompanied the Olympics, when labor and materials shortages made it more expensive to build anything, and prices of new apartments have outpaced the spending capabilities of the average Japanese family. Tokyo Shimbun quotes a 27-year-old “homemaker” who lives in Shinjuku with her husband and three children and frets that she wants to buy a new condominium in the area rather than “keep paying rent,” but that prices are way too high. “I want to move when the kids get settled in school,” she says, “but I want to live in central Tokyo and there’s nothing we can afford.” Dream on!

It may seem shortsighted to talk only about new condos in Tokyo, but the mainstream media has never been very interested in covering available stock anywhere but in the Tokyo metropolitan area. Still, for argument’s sake let’s leave the rest of Japan alone. If the woman cited above was herself employed and half of a “power couple” (at least ¥15 million combined yearly income), then she would not only be able to qualify theoretically for the down payment and loan conditions for a new condo in Shinjuku, but she’d be part of the demographic that was pushing up prices. Another demographic doing that is seniors with a lot in the way of assets. A real estate representative says that market growth is being spurred by people who already live in central Tokyo and want to “replace their present homes.” Redevelopment is progressing apace and the portion of the population that has this kind of money on hand remains stable. If these are mostly retired people, they are not the kind of retired people who sell their apartments and then move to the suburbs. They stay in the city center, and get a nicer place. They can afford it.

A real estate agent who mostly represents foreign buyers and whose network extends to 70 countries told Tokyo Shimbun that through May of this year, the number of inquiries they’ve gotten from real estate companies in the U.S. for Tokyo properties has nearly tripled since the beginning of the year, owing mainly to the drop in the value of the yen against the dollar. To Americans, Tokyo real estate is like one big fire sale right now, and buyers are snatching up deals in the most famous neighborhoods in the city—meaning, the ones whose names they’ve heard before—Shinjuku, Shibuya, Ginza, Roppongi. The truly wealthy are buying condos in the ¥500 million-¥1 billion price range, which, as mentioned already, is still cheap compared to other world class cities.

Harumi Pre-flag

Posted on August 24 by catforehead

While searching for any news about the current state of the Harumi Flag condo complex in Tokyo’s Chuo Ward, we came across an older related article with detailed information we weren’t aware of. As we’ve written here before, Harumi Flag was originally the athletes village for the 2020 Olympics, after which the apartments were renovated into condo units, many of which had already been sold. Because of the one-year delay for the Games, people who had put down deposits and made plans to move in had to put off those plans for at least an extra year, thus causing a lot of grumbling among the buyers.

According to a special report that appeared in July 2019 on the Min-IREN website, a consumer advocacy and social justice concern, people who already lived in the Harumi area of Chuo Ward on the waterfront had filed a lawsuit against the Tokyo prefectural government. The reporter was Nobuyuki Kitaoka, who often writes for the muckraking weekly Kinyobi, and he makes the point that the lawsuit had/has similarities to the 2017 scandal surrounding Moritomo Gakuen, the educational company that bought land in Osaka from the central government for a fraction of its assessed value, thus setting off speculation that this special deal was due to the fact that the wife of then prime minister Shinzo Abe was an honorary principal of the elementary school that Moritomo planned to build on the property. Apparently, the developers who would build the athletes village for the Olympics and then redevelop the complex into luxury condominiums also got the land at a fraction of its worth, and existing residents wanted to know why. According to Kitaoka, Moritomo paid only 20 percent of what the land it bought from the central government was worth, while the developers of Harumi Flag paid only 10 percent of the value to the Tokyo prefectural government, which owned it. Located only 3 kilometers from Ginza, the market value of the Harumi land was ¥959,000 per square meter, but Tokyo sold it to a consortium of 11 developers, including Mitsui Fudosan Residential, for only ¥97,000 per square meter. This consortium ended up paying a total of ¥12.96 billion for 133,900 square meters.

Til death traps

Posted on June 6, 2022 by catforehead

One of the main themes, if not the central theme, of this blog is that Japanese homes don’t hold their value over time the way they usually do in other developed countries, and while this situation does have a silver lining in that homes are affordable to a larger cross section of people, including young families, in the long run it makes it difficult for retired people to expect much in the way of a return on the investment they made in their home, which is usually the most expensive thing they own by a huge margin. But this feature of Japanese economic life has even broader effects on the quality of life for seniors, as revealed in a June 5 article in the Nihon Keizai Shimbun.

Certainly the main advantage of owning one’s home anywhere is that once the mortgage is paid off no one can kick you out. Regardless of income, a person who owns their home will always have a roof over their head. In Japan, this notion is usually conveyed by referring to the house or condominium as the person’s “final home” in that the person can live there until they die. The theme of the Nikkei article is that even this concept is no longer guaranteed or, at least, not assured in the way that most seniors thought it would be. The main reason is that the cost of renovations for homes has increased by 20 percent over the past ten years on average. This increase, combined with the fact that Japanese people are living longer, makes the possession of homes in Japan more difficult for people on fixed incomes.

According to a survey conducted by the justice ministry, the home ownership rate of households with two or more members and whose head of household is over 60 is above 90 percent, which is quite an impressive portion and speaks to the success of Japanese housing policy in how it has promoted home ownership over the years. In practical terms, it means the people who live in these households have a “final home” that should remove any economic anxiety from their twilight years, but Nikkei says that isn’t the case. For one thing, standalone houses in Japan tend to need extensive renovation work done on exteriors and roofs every 15 to 30 years, depending on when the house was built—the older the house, the more frequent such renovations are needed, and each time they are carried out they require at least ¥9 million. In the past year alone, costs for renovation have gone up substantially owing to inflation and the world distribution crisis. These costs are not expected to go down.

High anxiety

Posted on May 31, 2022 by catforehead

Last week, the media was filled with reports on Tokyo’s latest projections regarding what residents could expect if a major earthquake struck the capital. The parameters used for the simulation were a 7.3M quake that occurred directly beneath the prefecture’s 23 wards, with a shindo reading of 6+ for the city center, and shindo 7 for riverbank and coastal areas. It would occur in the wintertime with wind speeds of 8m/second. For the most part, the news was relatively good in that the number of deaths (6,200) and amount of damage (194,000 structures) estimated were less than in past projections—30 percent less, as a matter of fact.

In detail, 50 percent of the deaths would be caused by collapsed houses, and 40 percent the result of fires. In both cases, the houses involved would be older wooden structures that are densely concentrated, so the prefectural government has said—not for the first time—that it will work harder on providing subsidies for the rebuilding of such houses to make them less vulnerable to earthquakes.

An important factor in the lower casualty and damage numbers estimated by the report is improved quake-proofing since the last report was compiled. The portion of houses that have been quake-proofed since 2010 increased by 10.8 percent, which means 92 percent of all homes in Tokyo have some form of quake-proofing. In addition, the total area of densely packed wooden houses has decreased by 46 percent since 2012. The government now estimates that 4.53 million workers who live outside the capital would not be able to return home on the day of a major earthquake, and of the city’s residents 2.99 million would have to evacuate their homes. But while these numbers sound high, they are down by 12 percent from the last report.

However, there is one sector where matters have not improved: high-rise residential apartment buildings. As we’ve written in this blog numerous times in the past, so-called “tower mansions” have unique problems when it comes to earthquakes that have nothing really to do with their ability to withstand the tremor itself. All multi-story buildings in Japan, whether for commercial or residential use, are constructed to the world’s strictest quake-proofing standards, and are expected to maintain their integrity even during a catastrophic temblor. The problems occur after the shaking, and none have been solved in the past decade while at the same time there has been a 30 percent increase in the number of high-rise residential apartment buildings and condos during that time. At present, there are some 600 “tower mansions” in Tokyo, which are defined as multi-residence buildings that are at least 45 meters tall.

The Lie of the Land

Posted on May 14, 2022 by catforehead

Here is another chapter from our unpublished book about housing in Japan based on our own experience of trying to buy a home. This one is about residential land usage.

*Example of a private road built for a future* fukurokoji *housing development*

“It’s about the size of a cat’s forehead” – proverbial Japanese rejoinder when asked how much land a person owns

The real estate agent picked us up at the train station in a company car with long scratches on the side, probably inflicted during attempts to park in tight, unfamiliar spaces. We drove to the property through dense suburban sprawl overshadowed by pylons and interrupted by small plots of farmland.

The two-story house had royal blue siding and was sixteen years old. The owner moved out two years ago. The wallpaper was discolored, the laminate wood floors spongey, the second floor “veranda” filled with debris. The price: ¥5.8 million. We estimated it would take at least ¥6 million to make it livable, but ¥12 million for the whole thing seemed too much. Moreover, anyone who bought the house would have to assume the lease for the land, which was ¥38,000 a month.

The agent explained that the same landlord owned the property under the other four houses on the street. The owners all had them built at the same time and paid the same rent. The leases were 50 years, which meant the owner of the blue house was still paying rent even though he didn’t live there any more, and would continue paying rent until he found someone to buy the house and take over the lease. He originally wanted ¥12 million, but had come down to ¥5.8 million about a year ago. We asked what the options were if he couldn’t find a buyer.

“Oh, he could easily rent this place, depending on how much he asked,” the agent said. “Many people in this situation do that.”

This concept of owning a house on rented land, in Japanese called shakuchiken, isn’t uncommon. According to the land ministry, between 1993 and 2007, 35,492 single-family homes and 18,937 condominium units were built on rented land, a trend that peaked in 2001, when many companies in the Tokyo Metropolitan area starting selling off property, fueling a development boom characterized by cheaper condos. When prices rose after 2005, shakuchiken started becoming popular again. The agent said that the number of people building houses on rented land was increasing, “but you don’t see so many for sale.”

As a rule, the value of homes in Japan depreciates rapidly, but land is still expensive, and not just in urban and suburban areas. Because of usage laws that make it difficult to shift land designated for agriculture to residences, even the countryside can be costly.

We had decided to check out shakuchiken after talking to a friend, also self-employed, who had a house built on rented land seven years earlier. He and his family wanted to live in Kamakura, the trendy center of traditional culture located on the Miura peninsula just south of Tokyo, but were looking to rent since they didn’t think they could afford to buy a house there. A real estate agent directed him to a plot of land being developed by a housing company. The plot was owned by a local Buddhist temple.

Last Resorts

Posted on February 21, 2022 by catforehead

Here is another draft chapter from our unpublished book about our house-hunting adventure. This one is about second homes and so-called resort mansions.

One late summer morning in 2012 we were on the Tokaido Shinkansen super express and ran into a friend we hadn’t seen in years. He asked us if we were still living in Tokyo and we said we had moved some time ago because of the earthquake. He then asked what we were doing on the bullet train and we said we were on our way to Atami on the Izu Peninsula to look at some properties we might be interested in buying. He gave us a funny look. “That would seem to be the worst place to live if you’re afraid of earthquakes.”

True. Just the day before Japan’s Cabinet Office Disaster Council had updated its projections for a major earthquake occurring in the Nankai Trough, the deep indentation in the sea bed off the Pacific coast, and Shizuoka Prefecture, which contains Izu, was deemed the worst location in terms of projected casualties, though, technically, most of those casualties would be in the western part of the prefecture, not Izu. In any case, we weren’t completely serious about buying a place there. Having been frustrated in our search for a home we could afford, we were entertaining the idea of keeping our rental and buying a cheap old fixer-upper in a location with cooler summers. If our income situation worsened and we had to give up renting, then we would at least have a roof over our heads, and if things continued as they had been then we’d have a weekend/summer place. There are plenty of old dumps in the highlands of Tochigi and Nagano, or in the wilds of Chiba that can be had for under ¥7 million, though they’d require another ¥3-5 million to make livable. And during our search we noticed there were quite a few such places in Izu, too, mainly besso (separate homes), which we had avoided so far. Second homes tend to be built in specially designated developments managed by companies that charge yearly fees. Also, besso are usually impractical for year-round living, but since we weren’t necessarily going to be living in one year-round we thought we’d see what was available. And Izu is, as they say, the “Riviera of Japan.” More to the point, it’s cooler in the summer.

Harumi Flag Rising

Posted on August 21, 2021 by catforehead

Renovation work on the Tokyo Olympics Athletes Village that will turn the apartments into condominiums-for-sale won’t commence until after the Paralympics end in September, but already business media are exploring the future of the Harumi Flag residential complex, as it’s been dubbed by lead developer Mitsui Fudosan Residential. In the end, the various buildings will comprise about 4,800 units, and so far a bit less than one-third of those have already been sold. Since the Olympics was postponed in the spring of 2020, the date for moving into the complex has been moved back by at least a year to spring 2023, and there was talk that some buyers were angry because that means considerable added expense for them. Whether they have been offered a refund and an escape for their contracts isn’t clear, but, for sure, matters such as mortgage terms for the new condos and leases on rentals that the buyers may have to extend in the meantime could be serious hits to their bank accounts, especially given the current pandemic-affected economy.

However, those who have already signed contracts should be happy in one regard: the value of their condo seems to have gone up in the meantime, which means they got even more of a bargain than those who will sign contracts in the future. Condo prices in Tokyo have been steadily going up in recent months after dipping a bit last year, and it’s likely these increases will be reflected in the prices of the condos that will be put on sale starting in September. After the pandemic struck, sales activities for Harumi Flag were halted, which now seems like a good decision since Mitsui will likely be able to charge more. According to various real estate web sites, Mitsui will not put all the remaining units on sale at the same time, which would flood the market and bring the prices down. Though nobody seems worried right now that prices will drop over the coming months as more units are put on sale, the idea is to maximize demand as much as possible. As it stands, the units were already cheaper than comparable new condos on the waterfront by 30-40 percent, a situation that reportedly upset neighbors who paid premium prices for their apartments. The reason for the lower prices is that they are being repurposed and that the nearest train station is at least 20 minutes on foot (not counting the time it takes to get from one’s apartment to the ground floor), but also because Tokyo sold the land, which is reclaimed, to Mitsui and its partners at a 10 percent discount just because of the Olympics, a move that has also been criticized since Tokyo can’t really afford such largesse considering the larger-than-expected bill for the Games.

Baby you can park my car

Posted on March 28, 2021 by catforehead

We sold our car in 2006 and have never replaced it, despite the fact that in the meantime we moved out of the city and into a suburb where a car is considered essential. Our original reason for getting rid of ours was the cost. We were paying for insurance and biannual inspections and parking just for the privilege of owning a vehicle that we really didn’t use that much. Living where we did we had ready access to several train lines and as we both aged what we once considered the convenience of having a car at our disposal faded, mainly because driving in Japan isn’t very enjoyable, what with the narrow streets, highway tolls, and difficulty with street parking. Though we’ve often thought of buying a car again for emergency use, we keep putting it off because it’s really nice not to have that burden any more. We manage just fine with bicycles and car share services.

The last place we lived had an underground mechanical parking facility. The space you rented was actually a pallet that moved vertically and horizontally. Parking lots are two-dimensional and thus require a lot of ground space. Mechanical parking garages, what we liked to call “3D parking lots,” used space both above and below the ground level to store cars, thus requiring less real estate. When we wanted to use our car, we went to the carousel assigned to us and, inputting a special code, “retrieved” the pallet by rearranging the other pallets in the carousel in order to place ours right at the front of the gate. This means, of course, that you have to wait for all the pallets to be rearranged properly, and sometimes it took a little time. It was especially troublesome if somebody else who had rented a pallet in your particular carousel was retrieving their car just as you arrived. On a few occasions, we needed our car quickly in order to make it in time for an appointment, and someone was already there getting their car so we had to wait. Fortunately, we never had, like, a medical emergency that required an automobile. The only saving grace was the rent, which was relatively cheap for Tokyo. Before living in that apartment we lived close to the Saitama border and rented a parking space from JR under the railroad tracks. It was unpaved but the tracks protected the vehicles from rain, and we paid ¥23,000 a month. The pallet we rented was ¥18,000 a month, and it was much closer to the center of the city.