The higher they are…

Tower condos in Musashi Kosugi

When Typhoon Hagibis roared through the Kanto Plain Oct. 12, three homeless individuals were turned away from an emergency evacuation center in Tokyo’s Taito Ward because they could not prove they were registered as residents in the ward. The incident gave rise to a lot of soul searching on the part of the authorities, but there were also quite a few people on social media who felt the staff of the evacuation center didn’t do anything wrong. To these people, the homeless really are on their own and shouldn’t expect any help from the rest of society.

As it turns out, there is a corollary to this attitude that applies to the rich. As everyone knows, the Tama River overflowed its banks during the typhoon, causing flooding in parts of Setagaya and Ota Wards. The waters didn’t inundate the other side of the river, which lines the city of Kawasaki. However, the rising waters did cause sewage lines to back up, thus resulting in what is called “internal flooding” that inundated train stations and the basements of some condominium and apartment buildings. This problem was totally unexpected by both the authorities and residents of the area. The neighborhood that was hit the worst was the one surrounding Musashi Kosugi station, which services several train lines and is thus extremely popular. There are at least ten tower condominiums surrounding the station, and as we reported in an earlier post, apartments in these buildings are quite expensive. It’s one of the few areas in the Tokyo metropolitan area where used residences are increasing in price because they are in such demand. New condos in the area go for about ¥70 million, so only the affluent can afford them. Read More

Yen for Living: Houses As (non-)Assets

For sale? Good luck.

The following article was submitted as the July entry in our Yen for Living column for the Japan Times. However, it was rejected by the editors.

One of the issues facing voters in this month’s Upper House election is the national pension system. The government received criticism after the Financial Services Agency announced that a couple would need at least ¥20 million in savings when they retire to supplement their pensions. Opposition parties are using this figure to point out flaws in the pension system, and the ruling Liberal Democratic Party is challenging the FSA, saying that current pension benefits are adequate to support people after they retire.

In a letter published in the Asahi Shimbun on July 1, a 63-year-old dentist wrote about the ¥20 million figure, saying that when he was 30 he started saving for his old age. As a self-employed person he knew a public pension would not be enough when he retired, and so he joined a cooperative that, in return for monthly premiums, guaranteed a one-time payment when he reached a certain age. Over the course of 30 years, he paid a total of ¥18 million into the fund in the belief that he would receive ¥40 million in the end. But he received only ¥20 million. He also paid into a private pension plan, convinced that when he turned 60 he would start receiving ¥280,000 a month for a limited time. As it turns out, he is only getting ¥120,000, because interest rates have plummetted since he was 30. When he’s 65, he will start receiving benefits from his national pension, but since he belongs to the kokumin nenkin system for the self-employed and others who weren’t employed by large companies, he will only receive ¥65,000 a month. So even though he basically “invested” in private plans and paid his obligatory national pension premiums, he is not going to have as much income in his retirement as he once thought he would receive. Read More

Sky’s No Limit

Last week the government released population figures for 2017 and to nobody’s surprise the Tokyo metropolitan area was the only region that saw any increases. Given that Japan’s overall population is dropping, it was notable that the three prefectures surrounding the capital saw increases, even if they were very slight.

It would be interesting to know how much of these increases were attributable to the construction boom in so-called tower mansions, or high-rise condos. Two weeks ago, NHK aired a look at the boom that attempted to weigh the merits of high-rise living with the demerits. Until recently, most of the tower condos, which the program defines as a building of at least 20 floors, or 60 meters, were being built on the Tokyo waterfront, but now they are popping up like spring bamboo in satellite cities like Kawasaki, Saitama, and Kashiwa, because local governments are encouraging developers to build them with subsidies. In 1999, the year before national building regulations were eased, there were only 150 tower condos nationwide, but by 2016 there were about 800.

The NHK show was particularly interesting to us, not only because we once lived in a high-rish in the shitamachi district of Tokyo (we rented, though), but also in the past resided in the two cities that were profiled in the report, Kawasaki and Saitama. In the case of the latter, when we lived there it was before the merger of Urawa and Omiya, and there were no tower condos near Omiya station, one of the biggest transporation hubs on the Kanto plain. Now, within walking distance of the station, there are 2,700 relatively new condo units in skyscrapers, and they’re very popular, it seems. A new building that recently opened has 776 units and they all sold out almost immediately. NHK visited one couple with two kids who bought their 3LDK, just four minutes from the station, for ¥50 million two years ago, which is about ¥10-20 million cheaper than such a place would cost in Tokyo. The wife works in Takadanobaba and the husband in northern Saitama prefecture, so their home is right in the middle. The say they are “100 percent” satisified with their purchase, and NHK attributed the popularity of tower condos to the kind of facilities they offer. This particular building included a gymnasium, a theater room, a music room, hotel rooms for guests, a dance studio, and lots of amenities. Read More

Pity the landlord

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These are the kinds of apartments subleasing companies build.

We’ve already talked about the sublease racket. The term has a special meaning in Japan that’s related to a specific real estate scheme designed to sell apartment buildings to people with extra money. Construction companies build small apartment buildings on unused land for the owners of that land and then manage the property for them through a sublease arrangement that requires them to pay a guaranteed “rent” every month. The logic is simple. The property owners have to pay higher taxes on land that is empty and so they build an apartment building for purposes of reducing those taxes and providing income. The construction company then does all the work of finding tenants and managing the property.

As we’ve mentioned in past posts about this scheme, it heavily favors the construction company, which gets out of its obligation for guaranteed payments to the landlord through various small print loopholes. The construction company, which usually has a real estate subsidiary, is only really interested in building, and understands that as Japan’s population declines it is going to be more and more difficult to find enough tenants to make even small apartment buildings profitable. Consequently, they make sure there is something in the management contract that allows them to get out of the deal if things go south, and invariably they do. Read More

Genesis

Original plan for the Ikeda Muromachi housing development

Original plan for the Ikeda Muromachi housing development

Because Japan as a country didn’t make housing starts an integral part of its economy until after World War II, we’ve tended to believe that housing developments didn’t exist before the war, but, of course, that isn’t true. Recently we came across a 2009 article by a professor named Ken Shibata who teaches at Kyushu University’s graduate school. In it he describes several prewar housing developments.

Shibata writes from the standpoint that “suburbs in Japan are in trouble,” meaning that they are increasingly filled with vacant properties and are losing value along with residents. He blames the policy–which we’ve mentioned many times in our own blog–of focusing on new developments rather than maintaining existing ones, and he cites three prewar housing developments that today have good value even though they are quite old.

One is Denenchofu in Ota Ward, Tokyo, which sounds like a ringer. Denenchofu is famously upscale, with large, extremely expensive properties. Celebrities and rich executives live there. Though it’s not exactly Beverly Hills, it is as close to a Japanese cognate as you’re going to get. Another, more down-to-earth housing development is Tokiwadai in Itabashi Ward, which was first developed more than 80 years ago. Both these neighborhoods are in Tokyo proper, and even though they were relatively rural areas at the time they were first built, right now they have high property values simply because of their location and not so much because of the quality of their housing stock. Read More

Year Zero (2)

CIMG3303The landscaping took more than two weeks. It rained off and on, thus making work a bit difficult. We were surprised at how much equipment was needed to do what we had assumed was a fairly simply job, and wondered how they could charge so little when they were using backhoes, steam shovels, and cranes installed on the beds of large trucks. One of the reasons we didn’t order any concrete work was because we didn’t think it was worth the expense, the reason being that you had to hire an outside company with a cement mixer regardless of how much cement you were going to pour, but in any case on a few days there was quite a bit of equipment on the property.

CIMG3478The first order of business was moving the huge mound of dirt displaced by the septic tank. An older man did that and it wasn’t until the second day or so that we realized he was the father of the huge guy in charge of the project. It turned out to be a fairly tedious task. Since carting the dirt away would have cost us more money we asked if he could distribute it evenly along the akamichi–the strip of city-owned dirt road that bordered the southeast side of our property. We didn’t bother asking for permission from the city since it was obvious no public vehicle was ever going to use it. The old guy did as we asked for no extra fee, though to us it looked like extra work, since after depositing the dirt on the road he had to spread it around. In the end he did quite a good job of making it look inconspicuous–except that at the far end of the dirt road, just after it reached past the end of our property, there was a noticeable dip. Read More

More Than Enough

Pamphlet from local government explaining how property is assessed

Pamphlet from local government explaining how property is assessed

We’ve written about Japanese property taxes a few times and in our JT column we once mentioned that the system for assessing property values and calculating the amount owed is complicated. Consequently, local governments, who do all this work based on laws implemented at the national level, sometimes make mistakes.

Apparently, the problem is even more widespread than we thought. According to a survey conducted by the Ministry of Internal Affairs, between 2009 and 2011, 97 percent of local governments reported at least one case of overcharging for property taxes, though, of course, that would indicate there are probably many more cases. A recent issue of the tabloid-style weekly Friday interviewed an official from a support network for “asset preservation” who pointed out that property taxes are very different from income taxes in that they are completely determined by the authorities. With income taxes, at least the taxpayer can see how his taxes are calculated since he has the documents with all the pertinent information. But property taxes are determined by the local tax office and the property owner simply receives a bill every year saying how much he owes without any explanation of how the bill was calculated, and unless the taxpayer has knowledge about the property tax laws and how they may apply to his particular circumstances, he won’t know whether or not the amount charged might be wrong.

The extent of the problem was illustrated in a feature in the Oct. 5 Asahi Shimbun, which cited a number of recent high-profile cases. Last May, the owners of apartments in a complex in Isehara, Kanagawa Prefecture, found out that they have been paying too much property tax for their units since the complex was built in 1972 by the then national housing corporation. Condominium values are assessed according to floor area, and almost all of the 600 units in the complex are about 63 square meters, but they also have verandas. The city tax office was including the verandas, which are about 8 square meters, into the assessment, but verandas are considered kyoyo, or common property, meaning they don’t belong to individual owners, but rather to all the owners, just like corridors and building foyers. The assessment for common property in a condo is divided up among all the owners but taxed at a much lower rate than property that is owned individually. Read More