Dead houses

In the last year, we’ve seen a lot of headlines on social media about how you can buy a house in Japan for a song. The usual figure quoted is about $500 US, which makes us think that all these articles spring from one source that’s likely American. We haven’t bothered tracing the articles to one source, though we read a few of them and they all say basically the same thing: local governments throughout Japan are promoting the acquisition of abandoned houses in order to get people to move into their regions and lift the tax base. In some cases, they are even giving houses away, but in any situation these structures will need a lot of work before they are at all habitable. We’ve written extensively about the problem of akiya and since you get what you pay for it follows that the lower the price the more work that will need to be done. The worst akiya, it must be said, are not even on the market, meaning they were literally abandoned by the owner for any number of reasons—either because they moved out and couldn’t be bothered to try and sell it, or they did try to sell it with no success, or they simply disappeared in order to avoid having to pay property taxes, which, in all probability, were very low to begin with. Or they died—with or without an heir. There are a lot of akiya whose owners are dead, meaning they never transferred the title to anyone, and though heirs are still legally responsible in Japan they can be difficult to contact if they don’t want to be found. Those houses are probably unihabitable since they’ve been left to rot, and the local government doesn’t want to spend the money to have them demolished.

There are more than 8 million akiya and, not counting dedicated rental units, many are not livable and fewer are even sellable due to other factors such as location. So when you read an article about somebody who bought a house for nothing and fixed it up into a nice place it’s not just an exception to the rule, but almost an anomaly. Anytime a foreign person buys an old farmhouse or kominka and turns it into a monument to traditional Japanese craftsmanship they’re bound to get it featured in the news, but, again, it’s exceedingly rare. Most people prefer new homes, and because government policy has always privileged new house construction, potential buyers can always find something they can afford that’s new; and in many cases it will even be cheaper than an older house that requires extensive renovation, which describes a substantial number of old houses that are on sale. 

The reason these articles about cheap houses have proliferated in the past year is mainly the pandemic, which, for a while, cut into new home construction. People are moving out of the cities because they can now work from home, so used houses starting selling well, but, again, a lot still aren’t selling. We know of several houses in our general vicinity that are in good condition but they’ve been on the market for months, some even years. There are just too many cheap old houses that people want to sell and not enough buyers. Of course, much of it has to do with Japan’s decreasing population, but mainly it has to do with oversupply. When construction resumes apace, those old houses will become even more difficult to sell. 

More to the point, people who do sell their homes almost never make back what they paid for them. The exception is certain areas of big cities, but even in those cases it isn’t guaranteed, and then the seller will be even less likely to see a profit, especially when you factor in the interest they paid on their loan. (You’re more likely to make a small profit if you bought an old condo in a popular area of Tokyo and resell it later.) At this point, we think most Japanese people know this, despite all the talk about “maintaining property values” at all cost. We certainly know it. Almost as soon as we moved into our new house in 2014 the assessed value dropped by almost two-thirds—and that’s for property tax purposes, which tends to be higher than market assessed value. (Assessed value for land is a different matter) So we know we will never be able to make money on this house, which is one of the reasons why we had it built the way we wanted—meaning few other people would probably want it. But the problem as we get older is: What can we do with it when we reach the age where we can no longer live here? There’s a very good chance we won’t even be able to sell it. Since we don’t have children, there’s no one to inherit it. We’ve already brought up the possibility with some younger relatives that any of them can have it for free, and while they sound interested, we’re not sure if the idea of taking on a property is something they have the wherewithal to carry out. We’ve even thought of donating it to some organization, but that might run into problems with neighbors who find out about it beforehand. 

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Big One

To mark the tenth anniversary of the disaster of March 11, 2011, we are posting one of the chapters from the book we are working on about Japanese housing. Some of the following appeared in slightly different form in the anthology known as #quakebook. For those who may be interested, we have been looking for a publisher or agent to handle the book for the last year and so far have had no luck in placing it, so if anyone has advice, connections, etc., let us know. 

On March 11, 2011, the governor of Tokyo was Shintaro Ishihara, who later called the massive earthquake that struck off the coast of northern Japan that day “divine retribution” for some imagined slight to the nation’s soul. Never mind that all of the people who died or were left homeless by the disaster had lived in three northeastern prefectures far from the fleshpots of the capital he oversaw. Ishihara, a popular novelist in addition to being a politician, needed to make some sort of apocalyptic statement. 

No one thought there was anything “divine” about the catastrophe, but we could all appreciate a cosmic joke. The quake hit right in the middle of moving season. The Japanese fiscal year, not to mention the school year, begins April 1, and traditionally many people move house during the month of March because of changing jobs and entering university. Consequently, before, during, and after the quake there were moving trucks parked outside our 38-story apartment building in the Minami Senju area of Tokyo, carrying furniture for people who were settling in. Elevators in Japan are designed to automatically shut down in the event of an earthquake and they can’t be restarted until a technician arrives to turn them on again. Given that the entire city was affected, some buildings had to wait hours or even a day before someone showed up to get the elevators working. Movers were stuck on the street with trucks full of furniture while their customers stood in their new apartments appreciating the view as they swayed back and forth during one of the aftershocks that occurred on an almost hourly basis. Did they regret their decision to move into a high-rise? 

Perhaps not. The disaster helped answer a question: Would all these quake-proofed structures that had been built in the previous decades actually withstand a massive earthquake? Of course, the epicenter of the one we had just experienced was hundreds of kilometers away, but no buildings had collapsed in Sendai, the major city nearest to the quake and one with its own share of high-rises. So the technology seemed to work. But while it saved lives and property, it didn’t solve a more intractable problem: Once you’ve been in a major earthquake in a tall building, you don’t want to be in another one.

We had already been living on the 24th floor of River Harp Tower for more than ten years when the quake struck at 2:46 that afternoon, and had been through a good share of them. They just weren’t as intense. Usually, they started with a jolt followed by a gentle swaying. There are two types of quake-proof technologies for high rises in Japan. One is designed for flexibility: the entire structure absorbs the energy and disperses it more or less evenly throughout the frame, and the higher your floor, the wider and longer the sway. The other type, which is more expensive, involves rubber dampers in the foundation. We lived in the former type. On March 11, we didn’t feel that usual initial jolt but rather a slight rumble from the floor that just kept building until the walls started rattling violently. We knew this was going to be bigger than the usual quake and crouched together under a table. The shaking continued, and then gradually changed to swaying, which was much wider than it had been in the past. But the movement wasn’t as scary as the noise: a massive creaking sound that went on for more than two minutes.

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Go with the flow

Kominka interior. Note roka on the left.

Last week the Wall Street Journal ran a story about how proper ventilation of rooms can help prevent the spread of COVID-19 indoors. Japanese twitter responded in particularly derisive fashion by pointing out that in Japan proper ventilation was considered a pillar of the country’s anti-COVID measures as long ago as February as part of the government’s san-mitsu strategy, which told people to avoid “close” contact with others in “closed” rooms. Generally speaking, this strategy covered commercial, educational, or work spaces, since those were the most problemantic places in terms of keeping people safe from the spread of the virus. The operational logic then and now is that the virus doesn’t survive as long in the open, and so bringing the outdoors inside is a good way of keeping it at bay. For businesses, that means opening windows and/or optimizing ventilation systems to keep air moving through the space.

In Japan, however, greater attention is now being paid to transmission within homes, among family members. Coverage tends toward the inevitability of being infected by a loved one, since there is little you can do about your living situation. However, we would be very interested in seeing a study showing the relationship between intra-household infection rates and specific home layouts and other structural conditions. The first question that comes to mind is whether air conditioning systems help or hinder the spread of the virus. Generally speaking, the virus is in its best element in droplets of saliva expelled while talking or breathing, but scientists also talk about aerosol transmission, meaning the virus itself is carried on air currents. These particles can travel greater distances than droplets because they are much lighter and can still infect others by passing into their lungs when they inhale. Scientists are still debating the scale of infection due to aerosol transmission, but one thing that seems certain is that air currents in closed spaces are instrumental in propelling the virus and keeping it viable for longer periods of time than would happen outdoors or in indoor spaces with air flow passages that connect to the outdoors. Air conditioners are typically heat exchange mechanisms, and the public may misinterpret that to mean they exchange outside air for inside air, but that’s not really the case. Mainly they recirculate inside air and expel the ambient heat through outdoor fans. Consequently, there’s the possibility that if there are virulent particles in the inside air AC units may increase the possibility of causing those particles to enter into the bodies of humans in that space, and this is the main issue, especially in Japan where air conditioning, at least in residences, is a modular affair. Central air conditioning usually comes with filters that may be able to take out virulent particles (though viruses are really, really small). Apparently, some manufacturers have been touting anti-COVID features this summer, but one has to take such claims with a handful of salt. Daikin, to its credit, has been up front about air circulation and says that people should open their windows and use circulators and fans to facilitate ventilation. In other words, don’t count on their air conditioners. Because in the end the cooling efficacy of AC is dependent on how closed the room is and the efficiency of the insulation. That means all windows have to be closed tight and that there be no drafts in order to make full use of your AC. The entire home becomes a closed system, and the potential ventilation advantages of the AC unit-fan relationship is reduced by that much. The thing is, we just don’t really know now how this plays into viral infection rates. 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

Inzai as the future of Japan

New housing going up in the Inzai portion of Chiba New Town

It was a little odd to open the Japan Times this morning and find a feature about the city we live in, Inzai; odd in the sense that for as long as we’ve lived here whenever we tell people our address, in almost every case they’ve never heard of Inzai, which is the city just to the west of Narita in Chiba Prefecture. The article, written by Elaine Lies of Reuters, uses Inzai as a model for future growth in Japan, which is seeing its population shrink and age. For this purpose, the article compares Inzai’s situation with that of its neighbor to the south, Sakura, which is aging much more rapidly. The reason for Inzai’s good fortune is what Reuters sees as its aggressively pro-growth outlook. Inzai is one of the three cities that are part of the Chiba New Town development project, while Sakura is a typical suburban bedroom community that was developed in the 70s-80s during the lead-up to the Japanese bubble period. Though it includes some neighborhoods, like Yurigaoka, which was planned around an offshoot of the Keisei Main Line, that continue to attract young families, for the most part Sakura is made up of isolated housing subdivisions that no one is really interested in any more, probably because most of them are far from train lines. Inzai, on the other hand—or, at least, the part of Inzai that Reuters was covering—is built along the Hokuso Line, which also happens to follow Route 464, a major road that goes from the edge of Tokyo almost to Narita airport. In fact, the first item in the article that raised any eyebrows on our part was the factoid that says Inzai is 40 minutes from the airport. Actually, if you take the Airport Access train from either of Inzai’s two express stops, it’s only about 20 minutes, so we suspect the reporter got her information from someone who drives to Narita. As of now, 464 doesn’t reach as far as the airport. After it gets to the town of Sakae, you have to take back roads to get there.

And in a sense, this ironic lack of ready automobile access to the area’s most prominent feature is what makes Inzai less progressive than the article makes it out to be. Interestingly, Lies does not mention one feature of Inzai that the local government plays up constantly—that it has been named multiple times as Japan’s most livable city by the business magazine Toyo Keizai. The reasons have to do with things like affluence, green spaces, and convenience. Inzai’s tax base, as Lies implies, is quite sturdy owing mainly to the fact that new housing developments are booming along the 464 corridor. After we moved here in 2011, much of the land that had been put aside for the Chiba New Town project was opened up for development by UR, the semi-public housing corporation that managed the land. Because the land had been held for so long in the hopes that it would someday regain the value it had at the end of the 1980s (it never did), and UR was losing money in the process, the central government had for years been pressuring the corporation to liquidate it, and finally gave them a deadline. So they mostly sold it to developers and housing companies at prices far below those they’d paid, and all at the same time. The most valuable properties in the New Town area, those immediately adjacent to 464 and the Hokuso Line, were originally slated for commercial development, either for retail businesses or office buildings, and while Inzai did manage to attract a fair amount of commercial interests, it wasn’t nearly as much as Reuters seems to think. There are at least three shopping malls within 15-minute bike rides from our home and two of them are only half-occupied, despite the huge amount of residential development taking place. And as far as office buildings go, most were built two decades ago around the Chiba New Town Chuo Station. For the most part they are data centers for banks and other major financial institutions. Inzai is built on bedrock, so in the event of a major earthquake the records of these companies should be safe. As far as new commercial facilities go, the only things we’ve noticed is more logistics centers, which take advantage of Inzai’s proximity to Narita Airport. Read More

Last resorts redux

file_6_18_1Several times on this blog we’ve written about the collapsed market for resort condominiums, which are conveniently called “rizoman” (for “resort mansions”) in Japanese. The majority of these apartments were built during the asset-inflated bubble period of the late 80s and the hangover from that period in the early 90s. Many, but not all, were attendant to the ski boom, and after the bubble burst and people’s interest in skiing deflated, more and more of these condos were abandoned by their owners, the result being thousands of empty units in vacation areas throughout Japan. More importantly, however, it also meant huge losses in property taxes for local governments and the deterioration of condo complexes that were no longer collecting management fees from absent owners, most of whom lived in major cities. These specific circumstances led to an unusual phenomenon. The units themselves dropped dramatically in price on the resale market and could be had for a song (or even a verse), but they could hardly be sold because even if the market price was only a million yen or cheaper, whoever bought them would also have to cover the back taxes owed, not to mention the unpaid management fees, and together these two debts could run into milions and millions of yen.

At the end of last month, Asahi Shimbun ran a series of articles about a turnaround in Yuzawa, Niigata Prefecture, which is the closest town to one of Japan’s most famous ski and hot spring resorts. (It’s also where the Fuji Rock Festival is held in July.) Yuzawa has been for years the poster child for the crippled rizoman market, a place that saw a huge amount of construction in the late 80s/early 90s and which later stood as a symbol of pointless extravagance. According to a realtor quoted in one article, there are some 15,000 empty condo units in Yuzawa, accounting for 20 percent of all the empty resort condos in Japan. During the bubble period, when these units were new, they were so popular they could be sold at auction, and many went for as much at ¥100 million. Now, many are going for less than ¥500,000, depending on the size. Management fees, however, are still high owing to the fact that many buildings have large communal baths, swimming pools, recreation rooms, and exercise facilities. Read More

Suburban blight, Japanese-style

img_20161223_114702In our latest housing column for the Japan Times we talk about a new book by Chie Nozawa that explains in simple, clear terms why more and more abandoned homes, both houses and condos, will litter the landscape in coming years. She gives a lot of good examples of the kind of city planning, or, more precisely, lack of city planning, that has given rise to over-production of housing even as the population in general is shrinking and homes are left vacant.

Last week, she published an article in Gendai Business that summarizes and elaborates on the book. (Gendai is published by Kodansha, which also published her book) Her main thesis is that housing is “no longer” a financial asset, though we would probably argue that it never really has been. She points out that by 2033 one out of every three homes in Japan will be vacant, and that if nothing is done–either through demolition or some program to make more effective use of existing housing–there will be 21.5 million vacant homes in Japan. She give two reasons based on the fact that the huge boomer generation will be dying out in large numbers: 1) the homes the boomers have inherited from their own parents will be empty; 2) the homes the boomers built themselves will be empty because their own children built their own homes and thus have no reason to take those homes over. It seems almost redundant for her to mention that these homes, unless they are located in major cities on desirable land, have no value whatsoever. The homes that boomers now live in are old, and so their heirs cannot possibly move in or sell or rent them without extensive renovations, which is not liely to happen given the nature of the housing market, which is all about new things, as we pointed out in our column.

img_20161223_114841Thus, these properties have “negative value,” meaning regardless of whether the heirs tear them down or improve them, they will have to spend money that they will never see again because it will become increasingly difficult to sell or otherwise liquidate these properties, most of which are in the suburbs. And the more there are, the worse this problem gets.

This vacant house problem brings about what Nozawa calls the “sponge phenomenon.” In English parlance we might refer to it as the Swiss cheese effect: The suburbs of major cities, and even the cities themselves, become pocked with holes of vacancies that further erode surrounding property values and scare off younger potential homeowners, who gravitate instead to the nearest brand new ultra-cheap, ultra-cramped subdivision. Nozawa gives examples of regional capitals where this effect is already in full swing: 20.8 percent of the homes in Kofu, Yamanashi Prefecture, are vacant.

img_20161223_114030Vacant housing comes in four types: rental housing that is presently uninhabited, vacant houses on sale, secondary housing (vacation homes, etc.) that is unoccupied almost all of the time, and abandoned housing, meaning not for rent or sale, merely empty. Nozawa provides statistics showing that of these four type, the last, abandoned housing, is increasing at the fastest rate. She also shows the direct relationship between the amount of new housing being built in a town or city, and that locality’s portion of vacant housing. In most cases the more building that’s happening, the higher the number of vacant homes. A few enterprising spirits are trying to address this problem. One local real estate company in Higashi Matsuyama, about 50 kilomters north of Tokyo, is actively buying up small lots in these sponge-like neighborhoods and combining adjacent ones to make larger lots that can accommodate larger houses, but in order to do that effectively the realtor has to locate the owners of land that in many cases has been abandoned for a long time, and often that means negotiating with more than one reluctant heir.

It’s not a problem that is going away any time soon, or even later.img_20161223_115303

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 (1)

CIMG3311Two weeks ago we received a phone call from N, the salesman at A-1 whom we worked with when we built our house. There was a young couple who were thinking of asking A-1 to build a house for them, but they hadn’t yet secured a piece of land. Apparently, their desires are similar to what ours were: an area that had a bit more nature than your average subdivision. They currently lived in Matsudo, which is about 45 minutes west of us.

The request was a surprise. A-1 doesn’t advertise, since advertising adds to their overhead and thus to the cost of their products. They don’t build model homes for the same reason. When a potential customer wants to get an idea firsthand of what their homes are like, they ask past, presumably satisfied customers if they can bring the potential customers in for an inspection. We did it ourselves when we started looking for homes and read about A-1’s philosophy and design concepts, and were impressed, much more so than with any manufacturer’s model home display. In A-1’s case, you get to see how the owner is actually living in the house designed for them.

However, we thought our home may have been too individualistic for this kind of tour. When N called we had just received the property tax bill for the house and land. Since we moved in after January 1, 2014, we didn’t have to worry about a tax bill for the house until this calendar year, and last summer, when a city official came to assess our property, he almost laughed, implying that what we had wasn’t really worth that much. The tax bill seemed to bear out that implication. The estimate for the house came to less than ¥50,000. Of course, that wasn’t based on an assessment of the market value of the house, but nonetheless, even if you take into account the special deduction that reduces the amount due on a building for tax purposes to one-sixth its assessed value, the assessment was much less than what we paid for it a year ago. We’re not sure what that means, but we do understand that our house is unusual and, perhaps, not the kind of thing that would attract the average buyer: the kitchen and bath are on the second floor, the bedroom on the first; few doors and walls. It was designed to be inexpensive and to satisfy our peculiar needs, so it wasn’t exactly marketable, especially when you compare it to the vast majority of Japanese homes, which, we assume, reflect market demand. We had to assume that N was bringing the couple here because of the environment–the surrounding woods and such–which would give them an idea of what A-1 could accomplish in such a place. Read More