The major residential developer Sumitomo Fudosan will soon complete construction of two high-rise condominiums in the Sannomiya district of Kobe. The pair of 27-story buildings comprise 690 units, with apartments on the upper floors fetching as much as ¥200 million for their panoramic view of Kobe port.
Sales have been very good, and according to a recent article in the Asahi Shimbun it’s not just because of the great view and the vanguard amenities. Word has already gotten out that these two towers will be the last high-rise condos built in Kobe, thus increasing their scarcity value, which means that over time their resale value could go up.
But likely that would only be in the short term. The reason there will not be any more “tower mansions” erected in Kobe is that the city has decided to prohibit new housing construction south of JR Sannomiya Station, which is a commercial district. In addition, the city has restricted the capacity rate of any new residential construction around Sannomiya Station to 400 percent, which means no new tall apartment buildings. Essentially, the municipal government is limiting the amount of new housing that can be built in the city center.
Their reason for this restriction is worth scrutinizing. According to Asahi, many cities in Japan are competing with one another to attract new residents with high-rise condominiums in their respective city centers, the idea being that people want to live near their places of work. Osaka, for example, which is next door to Kobe, is redeveloping the Umeda district north of Osaka Station, a commercial area, and one of the prime features of this redevelopment is high-rise condominiums that the city leaders hope will attract well-to-do working people. The mayor of Kobe has said that this kind of policy doesn’t make any sense when a city’s population is decreasing, as Kobe’s is. When you build new housing while the population is going down, you’re basically creating waste for the future.
As we’ve pointed out in previous posts, the prices of new condos in Tokyo have risen considerably in the past few years owing to the high cost of construction, lowering supply, and an increase in sales to investors, whether Japanese or foreign. A June 20 article in the Asahi Shimbun about the cheap yen includes remarks from realtors who say that new condos in central Tokyo will remain expensive for the near future, with some, in fact, explaining that now they only deal with high-earning double income couples and rich investors.
In light of this situation, the news surrounding one large Tokyo condo complex has been instructive. Harumi Flag, which was originally built to be the athletes village for the 2020 Tokyo Olympics, finally started receiving residents in January after renovations to turn the living quarters into condominiums was delayed almost two years by the pandemic. However, according to a June 7 report by NHK, as of the end of May a good portion of the units in the 17 buildings that have been sold so far are empty, which NHK finds strange since the demand for the Harumi Flag condos was quite intense owing mainly to the fact that prices were reasonable compared to other real estate in the area. NHK’s investigation found that many of the units were bought by investors, which shouldn’t sound strange given the current real estate climate in Tokyo, but the Harumi Flag project was initiated by the Tokyo prefectural government for the secondary purpose of eventually selling the residences to people who would live in them, in particular families. That’s supposedly why the initial prices were set lower.
NHK checked the title registrations of 1,089 units of the 2,690 that have been sold so far in the Sun Village part of the complex. Mitsui Fudosan Residential, the company that headed the consortium of 11 developers involved in the project, has been selling the condos in phases, and in the most recent phase there were an average of 71 applications for each unit. There were no limits to how many applications a potential buyer could submit or units they could purchase if their luck was good. Under such circumstances, institutional investors applied for as many units as they could, since they could buy as many units as possible by borrowing money more easily. In fact, NHK discovered that 292 units out of the 1,089 they checked were owned by companies, or one out of four. Sales began in 2019, and four sales phases were carried out in 2021 and 2022, with the largest number of companies registered as owners with the justice ministry following the last of these. However, when NHK checked with the Chuo Ward office it found that there were no resident registrations (juminhyo) listed for 30 percent of the condos, meaning that, technically, no one is living in these condos. In fact, more than half the units sold during the last phase were bought by companies, with many purchasing more than one unit. The investors who own the 292 units in question comprise 147 companies, most of them dealing in real estate and investment. On further investigation, NHK found that only five of these units were being used by their corporate owners as offices. NHK makes a special note in the report that all these corporate owners are Japanese, which they think is surprising considering all the media attention being paid to foreign buyers of Tokyo real estate.
One investment company from Fukuoka, in fact, owns 38 units, and while they wouldn’t talk to NHK, their home page mentions their involvement in Harumi Flag “at an early stage” to “ensure stable returns on investments.” Two other companies did talk to NHK on condition of anonymity. One had 3 units in the complex and owned properties in Tokyo and Yokohama, as well as in the U.S. Their total real estate investments amount to ¥3 billion. A different company owns “more than 4 units” in Harumi Flag, and says they applied for and bought condos during each sales phase. In the beginning, they weren’t sure if the investment was wise, but now they are very happy because they are sure they can sell them for a hefty profit, and that seems to be the case. NHK says that so far hundreds of units have already been resold or are on the market for prices that are from 50 to 100 percent higher than their initial sales price. According to one real estate portal site, a 4LDK, 100-square meter unit in Sun Village that originally sold for ¥106 million is now on sale for ¥238 million.
But the market is still hot, so many of the investor-buyers are not planning on selling for a while and instead are renting out their units. Unfortunately, there are too many units for rent in the complex so few have found tenants, though there are other reasons for the low occupancy rate. Harumi Flag is 20 minutes from the nearest station and all the leases have a limit of two to five years, because the owners may want to sell the units if the price peaks. NHK doesn’t mention the cost of rent, but when we checked portal sites we found one 86-square meter unit asking for ¥420,000 a month and a 65-square meter unit going for ¥280,000 a month.
NHK talked to one couple in their 60s who made 7 attempts to buy a unit in Harumi Flag and failed. Their budget was ¥80 million, which was more than sufficient for a good-sized condo during the initial sales phases but not enough to buy one that is being resold, so they’ve given up, even though several buildings in the complex are still under construction.
We’ve written extensively about Tokyo’s current condo boom without really addressing what it will lead to in the long run. Most commentators seem to expect a burst bubble, like the one that happened in the early 90s following a similar over-valuation of properties in the late 80s. However, there is an important difference in that the current Tokyo bubble is being pumped up by rich people. The average price of a new condo in the capital has exceeded ¥100 million. In the late 80s, the bubble was caused by everyone, since the huge boomer cohort had secured its lifetime employment and banks were willing to lend them money. Even though housing interest rates are low in Japan compared to the bubble era, younger families with average incomes who still insist on buying new condos are finding it difficult to find anything they can afford in the 23 wards, according to local media.
A recent video on the YouTube real estate channel Rakumachi put the present bubble in perspective, especially in terms of what it holds for the future. According to Tomohiro Makino, a “real estate producer” whose career started in the 80s, people who say the Tokyo condo market is “over-heated” need to look at classic supply-and-demand. “Over-heated” suggests that the market will eventually cool, but since this particular bubble is being caused by rich people and institutional or business investors, it isn’t that simple. Scarcity is one of the factors fueling the over-heated prices: the number of new condos on sale in recent years is one-third the number that were on sale in a given year two decades ago. Much of the reason for this scarcity is the high cost of building materials and lack of labor. Building a condominium is much more time- and capital-intensive than it used to be, so developers have scaled down. And with prices so high, buyers trend toward people who benefit from certain financial realities, such as foreign investors who can exploit the historically cheap yen. Even rich elderly Japanese who don’t necessarily need a new place to live are buying high-end condos in Tokyo as hedges against taxes their heirs will have to pay when they die. So they invest their cash in real estate, which can lower the inheritance tax burden by as much as 70 percent. Those who do buy new Tokyo condos for living purposes tend to be so-called power couples—married people whose combined incomes exceed ¥15 million a year.
So the high condo prices are essentially being maintained by a small group of people. Nomura Securities says the number of “very wealthy” households in Japan, meaning they are worth more than ¥500 million each, is around 90,000, for combined assets (not counting debt) of ¥105 trillion. Merely “wealthy” households (¥100-¥500 million) number around 1.4 million with ¥259 trillion in assets; “less wealthy” (¥50-¥100 million) number 3.3 million with ¥258 trillion; upper middle class (¥30-¥50 million) number 7.2 million with ¥332 trillion; and the vast middle class (less than ¥30 million), numbering 42 million, is worth ¥678 trillion. Though the top two tiers account for a bit more than 2 million households, the amount of assets they control is considerable. Much has been made of the global income gap in recent years, and Makino says the top 1 percent in Japan has seen its wealth increase by 80 percent since 2013, when Abenomics. The investment market was flooded with easy money, but average households received no comparable benefit from the policy. Makino says that its effect on real estate has led to the over-heated condo market, putting Tokyo real estate out of the reach of the middle class. Developers don’t even think about this group of consumers, because they know that even if every condo they build is luxury-class, they can still sell them. Consequently, they don’t have to build that many in order to make as much money as they used to make when they sold to everyone. The average price of a new condo in the 23 wards as recently as 2015 was ¥60 million. Last year it was ¥115 million. And due to the lag in construction costs, prices will continue to go up for the near future.
And it’s construction costs that are the main concern for developers, since right now they account for 70 percent of the cost of a condo, the other 30 percent being land. This aspect is very significant, because while land prices vary greatly depending on location, construction costs do not. It costs almost the same to build a condo in the suburbs as it does to build one in the center of Tokyo, so most developers are putting as much of their money and resources as they can into the city. Even mid-sized developers that tend to do all their work in the suburbs are foregoing new construction to invest in new condos in Tokyo by borrowing money to buy them from major developers. Then they quickly resell them to make money. The most prevalent example of this kind of practice in the news right now is the Harumi Flag complex on the waterfront, which was built as the Tokyo 2020 Olympic athletes village and then sold or rented out afterwards. A substantial number of the condos remain empty because they’ve been bought by corporations, including developers, as investments, thus pushing the price of individual units up. According to Makino, some companies have bought from 10 to 20 units in Harumi Flag.
Makino sees this trend continuing as long as interest rates remain low, since most investors don’t use their own money to buy real estate. Once rates start to rise, he says, the market will cool as investors pull out. Now that the era of the “negative interest rate” has ended in Japan, he thinks that such a change is on the horizon, even if many experts believe the Bank of Japan won’t increase interest rates due to the amount of government bonds it has. But the BOJ doesn’t control interest rates. Other factors, including environmental disasters, international politics, even rumors, will always come into play, and once they do “the party will be over,” meaning even foreign investors will bail regardless of the exchange rate. This could prove to be a huge shock to the system. After all, young Japanese adults today know nothing about interest, having been born without any experience of bank deposits earning interest. It’s unrealistic to think that this kind of environment will persist indefinitely, but until it does change it’s also unrealistic to thing that average Japanese people will step in when wealthy investors drop out. It’s just too risky for the average household to buy a condo in Tokyo now or in the near future.
If Makino were to give advice to potential middle class homeowners who want to live in Tokyo, it would be to wait, probably until 2030, by which time he says the “market will surely change.” Not only will prices for condos, used and new, go down, but so likely will rents. And his reasons for thinking so are grounded in an unavoidable truth. Households headed by people over 65 in the Tokyo metropolitan area now number 9 million, with half of those headed by people over 75. That number will steadily increase. After 2025 all the 1.5 million boomers living in the metro area will be over 75, and while lifespans are also increasing, it won’t be long before this cohort starts dying out in record numbers, which means their property will either be left to heirs or abandoned, if it hadn’t already been sold. These people came to the metro area in their youth to work, and they bought homes. But their children, now middle aged, mostly own their own homes, too, and so won’t need their parents’, which means they’ll sell it or do something worse (pretend to ignore it?), but in any case there will be a lot of empty homes on the market. This, as Makino points out, is the heart of the akiya problem, which will only intensify by the end of the decade, throwing the real estate market, including Tokyo’s, into turmoil. Oversupply will become a chronic issue unless the construction industry and the authorities change their tune with regard to building new residences, which is pretty much all they think about now.
One of the fees that condominium owners have to pay every month is called shuzenhi, which are contributions to a fund that will go toward large-scale repairs of common property in the overall structure, such as exterior walls and some plumbing shared by all the residents. This fee is separate from the management fee, which goes toward operation of the building and more immediate maintenance, including mandatory elevator inspections. Ideally, large-scale repairs should be carried out every dozen years or so, but they usually aren’t owing to difficulty in gaining approval from the needed majority of owners. As a result, many buildings fall into disrepair after several decades, but even when the homeowners get it together and vote for necessary work, there usually isn’t enough money in the fund to cover what has to be done. That’s because developers purposely set the monthly fees for the repair fund low so as to make it easier to sell units when they are first put on the market. We’ve read of cases where homeowners in some condominium buildings had to pay tens of millions of yen each on top of the money they’d contributed to the fund in order to get repair work done. Most condo operations are run by outside management companies, which may or may not be related to the original developers, and one of their tasks is to raise the shuzenhi gradually over the years so that there is enough money for the repairs, but, again, they need to gain the approval of the mandated portion of owners to do it, and that can be hard.
In response to this problem the construction ministry last month assembled a panel of experts to study a system, first implemented in 2022, for local governments to certify whether condo owners associations are operating properly. According to a ministry survey the amount of funds needed for long-term repairs is, on average, 3.6 times the amount collected using the original contribution calculation, but this real amount can go as high as 10 times the originally collected fund. Another survey conducted in 2018 found that 35 percent of condos nationwide have insufficient repair funds, which is likely a low estimate. According to a Feb. 23 article in the Asahi Shimbun, the ministry is trying to come up with better ways to persuade condo owners associations to increase their repair funds by adopting a savings plan based on long-term estimates of exactly how much money will be needed. Usually, when developers set the monthly contributions no such estimates have been made. The amount of the contribution is set arbitrarily based mainly on market considerations.
The revised plan that the ministry has submitted to the expert panel for study says that the amount needed for long-term repairs should be calculated and then divided into the number of owners and number of months remaining between the start of the fund and the proposed repairs. The ministry recommends that the actual monthly contribution be no less than 60 percent of the estimate and no more than 110 percent. However, if the fee is set at less than what is needed for the eventual repairs, the association can increase it over time by up to 80 percent. This means that if the full monthly contribution for long-term repairs is calculated to be ¥20,000 based on what the cost of repairs will be in the long run, the developer or whoever makes such a decision can set the actual contribution as low as ¥12,000, but then can increase it over time to ¥22,000.
Such a plan would be included in the management authorization system that local governments use to certify condo owners associations. Certification is based on whether the association has a long-term repair scheme. If the local government grants certification, the association is entitled to borrow money for large-scale repairs at a lower interest rate.
In a followup report on Feb. 27, the Asahi looked at a condominium in Tokyo’s Adachi Ward that contains 28 units and was built in 2008. Three years ago, the owners association increased the repair savings fund contribution 3.5-fold. The 45-year-old head of the association said that when he took over the position in 2017 he realized that the fund was about ¥20 million short of what it should have contained according to the initial savings plan. The reason for the shortage was that previous association heads did not carry out contribution increases every three years in accordance with the initial plan. The current head invited an expert to talk to other members of the association about what they needed to do, saying that if they didn’t carry out these needed repairs, the building itself would need even more expensive work down the line just to keep it working. Though the owners approved the new contribution plan, it took two years and 8 months to convince them.
The purpose of the ministry’s certification system is to avoid this kind of delay because increases in contributions would be incorporated into a plan, but as the Adachi example shows, even when such a plan exists it doesn’t mean the owners association will stick to it. The certification system is an incentive, but it is not mandated by law. For that reason, in addition to being eligible for lower interest rates to borrow money for repairs, the panel has suggested that associations who devise a plan and stick to it could have their property taxes lowered. As of the end of February, only 481 condo associations nationwide have been certified. The panel believes that the guidelines for the system should provide more of an incentive if such certification doesn’t have the force of law behind it.
One of the prime purposes of this blog is to explain the paradox of Japan’s housing situation. The country’s residential real estate market is one of the liveliest in the world, and yet most homeowners can’t count on their properties being net assets in the long run. And then there’s those 8.5 million empty residences, which, despite the occasional media story about some foreigner swooping in and turning a derelict kominka into a dream home, will likely remain empty forever without a concerted effort on the part of the central and local goverments to either find a way to make them desirable or get rid of them.
A recent story that appeared on the financial magazine Toyo Keizai‘s web site reinforces this paradox. The writer, a real estate consultant named Yujin Oki, claims that there is a critical housing shortage in Japan. In a long article dense with statistics he doesn’t even mention the akiya (empty house) situation, probably because his focus is still on urban housing, and most abandoned homes are in the countryside or outlying suburbs (though there are also quite a few in Tokyo). The part of the paradox he does mention is the demographic angle: Japan’s population is declining, which means the available housing stock should be increasing, but it isn’t. He then endeavors to explain why.
Since 2013, he writes, the price of condominiums in Japan has increased by 70 percent. The main reason is Abenomics, or, more precisely, the monetary easing policy that was a core component of the late Shinzo Abe’s master plan to bring the Japanese economy back to its former glory. The Bank of Japan would print more money and give it to commercial banks at low interest rates. Most of this cash was loaned out to buy land, since it is the most secure investment, and that drove prices up. This always happens with monetary easing.
However, the situation was complicated by extraneous factors, namely the sudden increase in the price of construction materials and the more gradual decrease in the construction labor pool. Residential developers who borrowed all this available cash were faced with rising construction costs and delays in construction time due to lack of workers, thus driving the price of newly built homes higher. On top of the boost in land prices, new housing was more expensive, especially in places like Tokyo and its surrounding suburbs. Though he doesn’t specify exactly when, Oki says that the number of new condos in the Tokyo metropolitan area going on sale was once 90,000 a year, but this year the number has dropped to only 30,000. That’s why there is a shortage.
As we’ve often pointed out in this blog, almost all the writing about real estate trends focuses on Tokyo, and this article is no exception. Oki does make a point of saying that the shortage he’s talking about is in “places where people want to live,” but doesn’t interrogate that qualification any further. For instance, we can say for a fact that the suburb where we live, an hour from Nihonbashi by train, has seen a lot of new building in the last five years and many young families moving in, but this kind of growth seems to play no part in Oki’s calculations. New homes still seem to be affordable and plentiful for people with average incomes in our neck of the woods.
The news that land prices throughout Japan have risen 0.3 percent over last year’s prices was covered extensively by the media last month. Though 0.3 might sound negligible, it’s the first time in 30 years that the change was in the positive direction. Of course, land values in the three major metropolises have always gone up in a net fashion to a certain extent, but prices in what are called “regional areas,” meaning the countryside and smaller urban metropolises far from Tokyo, have either gone down or remained stagnant. The big news is that this increase has happened two years in a row, thus proving it isn’t just a fluke. According to the Asahi Shimbun, four regional capitals led the surge—Sapporo, Sendai, Hiroshima, and Fukuoka. During the pandemic these cities saw land price increases of between 4 and 6 percent, but last year the change was plus 8.1 percent. As it happens, rural land continued to lose value during the pandemic, but on average last year it leveled off: prices in 27 of 38 prefectures surveyed went down as a whole, but the prices in the capitals of 20 of these prefectures either increased or remained the same, further proof that land value may finally be turning the corner, so to speak.
What this means, according to Asahi, is that people are moving into these regional cities in substantial numbers, thus boosting hiring and education, which in turn spurs redevelopment. So far the most publicized examples of this trend have been the introduction of semiconductor factories into areas where there was previoulsy little industrial development, namely Chitose in Hokkaido and Kikuyo in Kumamoto. In the former, the company Rapidus is building a factory that will open in 2027, employing about 1,000 people. Local realtors told Asahi that individuals and businesses are snatching up property near Chitose Station, the main train hub in the area, which is about 40 minutes from Sapporo. Some realtors claim that there is no more vacant land to be had around Chitose Station, and what is available slightly farther from the station is “very expensive.” By the same token, TSMC, the Taiwan semiconductor maker, plans a factory in Kikuyo, and the news has caused land prices in the area to skyrocket. One reason for the unusual increase is that a lot of people who own land in the area are not selling at the moment, but waiting for land values to increase even more before they put their properties on the market.
Another reason for regional increases is that retired people are selling their homes and moving into apartments and condominiums in regional cities, thus boosting property values in those cities. One developer told Asahi that in Yamagata City a new 70-unit condominium still under construction is almost sold out and cites the availability of services in the area as the main appeal: a ten-minute walk to Yamagata Station, and within a 5-minute walk 3 hospitals, a full range of public schools and a retail district. Even with prices going up, a unit in the new condo is very affordable, 3LDK for only ¥35 million, including tax. One 88-year-old woman told Asahi that she moved to an apartment in the area after selling her house and since then her life “has become easier because I don’t have to shovel snow.” Asahi notes that land prices in Yamagata Prefecture are still dropping, but prices in Yamagata City have increased for 9 years in a row.
According to news reports, the extreme heat we’ve had to put up with this summer is going to be a normal thing from now on. For a while it seemed as if Japan was going to be spared the worst of it, but that isn’t the case any more and forecasters are saying we’ll be sizzling until early October. The authorities warn people, especially the elderly, to use their air conditioners whenever necessary because heat stroke can creep up on you, even when you’re indoors and out of the sun. According to the land ministry, 89 percent of Japanese homes have air conditioners, but that portion drops along with income. Of households that earn less than ¥3 million a year, 84 percent have AC.
There’s one demographic, however, that lacks AC almost altogether, and mainly for systematic reasons: people who live in public housing. An August 1 report in the Asahi Shimbun told of a 43-year-old woman who lives with her three children in a 3DK apartment run by the Tokyo Metropolitan Government for low income families. The rent and management fees for the apartment come to about ¥30,000 a month, which is half what the woman paid for a private rental apartment before she moved into the prefectural building 3 years ago. At the time, the apartment did not have an air conditioner, so she bought one for ¥70,000, including installation, at a discount appliance shop. Her apartment is situated on the corner of the 6th floor and gets a lot of sun, so nights can still be intolerable due to poor air circulation. The woman and her 13-year-old daughter share a six-mat room, leaving her two sons, one 19 years old, the other 17 years old, with a room each to themselves, but in the summer they all sleep in the same room because that’s the only one with AC, which isn’t strong enough to cool the whole apartment. Consequently, the sleeping arrangements in the summer are close and uncomfortable. During the day, they place electric fans strategically throughout the hallways to distribute the cool air, but it doesn’t work very well. The woman would like to buy a second AC, but there’s no place to put it. Her room is next to the veranda, so the fan unit can be placed there, but there are no other places in the apartment where a second AC could be installed. The building, which is 40 years old, was not designed with AC in mind. The electrical current in each apartment is set at 20 amperes, though it can be increased to 30, which still would not be enough. If the AC is on, she has to be careful not to use too many other appliances, otherwise the circuit breaker will trip. And, of course, her electric bills are high. Public housing is notorious for having bad insulation, and her salary as a caregiver is only ¥220,000 a month. Besides, if and when she leaves the apartment, she is required to leave it as she found it, which means she will have to remove the AC and take it with her.
There are 2.16 million public housing units in Japan, all run by local governments. The central government requires that all have kitchens, flush toilets, wash rooms, and bath rooms. AC is not required. The land ministry says that 60 percent of public housing units are more than 30 years old and 60 percent contain a head-of-household over 60. The Tokyo Metro government only provides 260,000 units (individual wards may run their own low-income public housing), 79,000 of which were built before 1970. None of the public housing in Tokyo comes with AC, though newer buildings have features that make it possible to install AC units. When Asahi contacted the relevant prefectural authorities, they said that older buildings are regularly renovated but not in terms of improving insulation or making it possible to install AC units. One staff member said, “We formulate design policies in terms of cost effectiveness.”
A professor of environmental engineering told Asahi that all public housing in Japan is concrete-based and poorly insulated compared to wooden buildings. That means that temperatures don’t drop appreciably at night. Even if a unit in such a building has AC, it’s possible that the interiors will remain above 30 degrees. This is particularly worrisome for elderly tenants, who are more susceptible to heat stroke. Top floors are particularly dangerous since rooms sit right under the roof. According to medical statistics, about half the people who suffer from heat stroke and live on the first floor of a collective housing facility end up hospitalized while 90 percent of heat stroke patients from top floors are hospitalized.
Another professor who studies low income households says that even when they have AC installed, elderly people in public housing often don’t use it because of the electricity costs. He cited statistics showing that most of the people hospitalized in Tokyo for heat stroke were old people who simply did not turn on their AC, especially this summer after electrical utilities nationwide raised prices considerably. He has demanded for years that local governments not only improve insulation in public housing, but that they install air conditioners in all apartments, because the problem of heat stroke among lower income people is only going to get worse from now on.
One of the resort condos in Yuzawa offering short-term stays
Last month, Gendai Business published an interesting article about the glut of empty resort condominiums throughout Japan and what some local communities and businesses are doing about them. This blog has addressed the “resort mansion” problem, which stemmed from a post-bubble construction boom of vacation properties. Many of these condos were built near popular ski resorts, since there was also a ski boom in the 80s and 90s that eventually went bust. Consequently, the owners of these condos stopped coming to ski and didn’t keep up their properties. Market values plummeted, sometimes, as Gendai points out, to as little as ¥100,000 for a standard 50-square meter unit. The reason for the cheap price was more than just low demand. Resort condos have higher monthly management and repair fees owing to extra facilities, like large, collective bathing facilities and ski lockers. Absentee owners were not paying these fees and anyone who bought the units were expected to pay them retroactively. There were also property taxes that local governments were keen to recoup.
Gendai’s take on the matter is optimistic, starting with the idea that, as inbound tourist traffic goes back to pre-COVID levels and the yen remains low vis-a-vis the dollar and other currencies, foreigners have become interested in these properties. The novel inference in the article is that most of the interested parties are rich Southeast Asians for whom snow is a fascinating draw. The reporter states that while “there are high mountains” in other Asian countries, “the snow doesn’t normally accummulate,” meaning that a sport like skiing isn’t feasible in these countries. Even China had to manufacture snow when it hosted the Winter Olympics. So if Asians do partake of skiing and they have money, Japan is a much more convenient destination, because ski resorts are eash to access from Tokyo or any other city with an international airport.
The reporter may be stressing this point beyond its natural flexibility, but what he wants to show is why one ski resort town, Yuzawa in Niigata prefecture, is seeing a Renaissance in its property market. Yuzawa is an hour and 20 minutes by Shinkansen from Tokyo; 3 hours if you take a highway bus. And while some ski resorts in Japan have seen less snow in recent years, Yuzawa still has enough of the stuff to maintain its ski and snowboard cred. It may not be Niseko in Hokkaido, which is treasured by world ski freaks for its natural powder, but Niseko is also expensive and more remote and, besides, it seems to be overrun with Australians during the high ski season. So Yuzawa is accessible and affordable to a wider cross section of tourists. Moreover, it has hot springs, which are just the frosting on the cake for Asian travelers. And, in fact, as Gendai points out, this aspect at first made Yuzawa a problem for Asian tourists, since most Japanese tend to think of Yuzawa first as a hot spring destination rather than a ski resort, which didn’t really show up until the late 80s, so there are still some inns in the region that don’t welcome non-Japanese speaking guests.
But Yuzawa has plenty of resort condos, and local real estate companies, not to mention the local government, are keen to introduce them to foreign buyers. Last February, another business publication, Toyo Keizai, ran an article focusing on the condo market in Yuzawa. Since the end of COVID, prices have almost doubled, which may not necessarily say much since, as Gendai pointed out, some units were going for as little as ¥100,000. But Toyo Keizai claims that the average price for a resort condo in Yuzawa now is more than ¥2 million.
An article in the July 1 Asahi Shimbun reported on a police investigation of a staff member of Tokyo’s Edogawa Ward’s public welfare department who was suspected of “abandoning a dead body.” Usually, when police make such an accusation, it’s a preliminary stop toward a charge of murder, but this case is very different.
According to the article, a 65-year-old man died in his Edogawa home in January. A caregiver who regularly visited the man discovered the body on January 10 and called a physician at the clinic that dispatched the caregiver. The doctor went to the residence and confimed that the man was dead and, following official procedures, reported the death to the relevant case worker in the ward’s welfare department, since the deceased had been receiving public assistance.
But while the case worker later acknowledged that he had received the doctor’s report, apparently he did nothing. On March 27, an agent of a rental supply organization visited the deceased’s home to pick up some equipment that had been lent to the man through the welfare program and found that the body was still there two-and-a-half months after being reported. In trying to explain this lapse in procedure, the case worker said they had been overwhelmed with work and had simply kept putting off the matter of the dead body. It should be noted, however, that this worker wasn’t the only person aware that the man had died. After receiving the doctor’s report, the case worker immediately informed their superior about the death so that the ward would stop its public assistance to the man. Following an investigation, the police said they sent their file to prosecutors, but apparently the case worker wasn’t charged. When contacted by the Asahi, the head of the ward’s welfare department said they purposely did not publicize the incident and would have nothing to say until a news conference scheduled for July 3, which is today.
According to subsequent media reports the deceased had been renting, which makes the story even more bizarre: When they didn’t receive a monthly payment, why didn’t the landlord check on the tenant?
In any case, the story will likely only reinforce an unfortunate trend that has been on the rise for several decades and which was described in a June 16 post on the Daily Spa!. Landlords have become increasingly averse to renting to people “over 60” because they are afraid that elderly tenants will die on the premises, thus causing them considerable expense in preparing the residence to be reoccupied.
The main thrust of the article is that more and more seniors are having difficulties finding rental properties that will accept them. Many real estate agents for rental properties don’t even allow elderly people through the front door because it’s too much trouble. Spa! says that the general image in Japan is that the elderly are all homeowners, but, in fact, according to a government white paper, one-in-three people living in single-person households who are over 65 do not own the homes they live in. And this portion is increasing. As one agent who specializes in helping senior renters find dwellings told the magazine, most conventional realtors won’t even talk to elderly renters “no matter how much money they have.” The agent said that according to his company’s in-house survey one out of four elderly people say they’ve been rejected for rental housing as least once, and of these 13 percent said they’ve been rejected more than 5 times.
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.
Cat Foreheads & Rabbit Hutches 