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

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

Pump it up

All's well that ends with a well

All’s well that ends with a well

Before construction could start we had to dig a well. Though our land was nominally within a housing development, it was a rather small one; basically a piece of wooded property surrounded by farmland that had been sold to a real estate company, which had divided it up for sale. But calling it a “housing development” is pushing it, since the usual infrastructure wasn’t available: no waterworks, sewerage, or gas lines. Technically, the land isn’t zoned for residences. It exists in that bureaucratic limbo known as shigaika chosei kuiki, which means an “area being adjusted for urban use,” but for all intents and purposes it’s land that does not have infrastructure but nevertheless is being sold for a profit. We cannot actually build on the land until the local land authority gives us permission, so buying it before the fact would seem to entail a risk, but these kinds of sales happen all the time and are always approved. We could see that for ourselves, since there were already five finished houses in this development and they had gone through the same thing. Over the past three years we had looked at many properties that were also classified as shigaika chosei kuiki, and in many ways they were more to our liking since lots that were already approved for residential construction tended to be in housing developments built by developers, meaning they were densely populated, and we wanted more breathing room. The thing about infrastructure is that most of it is built by private or semi-private entities who aren’t going to extend utilities to areas where they won’t see a profit, and a dinky little housing development of eight homes in an agricultural area where farming families have been living for generations without infrastructure isn’t worth it. Interestingly, the border of Chiba New Town is only a 10-minute walk from our property, and anything within that massive, 40-year-old development project, which incorporates portions of three cities, has access to all the usual infrastructure. But proximity means nothing. We might as well be living on the moon. Though we had already paid for the land and gave the go ahead to have the well dug, we called up the semi-public water authority whose bailiwick was closest to our property and asked about future prospects of waterworks being extended to our neck of the woods. We were essentially told that it would never happen. A little more research revealed that water usage throughout Japan peaked around 2001 and has been dropping ever since, and because local water authorities’ funding comes from customer billing and not from any public outlay they have less money with which to lay new pipe than they had in the past, so there’s absolutely no incentive to extend waterworks to any areas except those that guarantee a large customer base. Read More

The burden of expectations (3)

What we're trying to avoid

What we’re trying to avoid

We went to Tsukuba on a Friday, and the following Monday the woman from SBI Mortgage called and said we had cleared the preliminary screening. She had already given us a checklist of the documents we would need to submit for the final screening and so we started to collect them. It’s a time-consuming process because many documents are required and you have to go to different government offices to get them. The woman had already photocopied our drivers licenses, national health cards, and three years worth of tax returns. Now we had to get real proof of our worth, so to speak. The easiest to obtain was proof of residence (juminhyo) from the local city office. The checklist still had gaikokujin toroku shomeisho, meaning proof of an alien registration card, but the Foreign Ministry had phased out registration cards last year. We could also pick up inkan shomeisho, meaning proof of registered seals, at city hall. In bureaucracy-obsessed Japan, seals remain the looniest relic, since anyone could go to the store and buy one with another person’s name on it and use it in that person’s stead. Signatures are still not commonly used for purposes of witness and certification, though they’re obviously more individual. In order to somehow safeguard the seal as a means of certification you are supposed to register yours at your local government office, and then when called upon by a party with whom you are drawing up a contract you bring that party “proof” from the local government office that the seal you are using is kosher, though I have no idea how counterpart parties check this evidence unless they’re experts in wood-block printing.

A bit more difficult to secure was proof of our income for the last two years. The copies of our joint tax return were used for the preliminary screening but for the next phase they needed actual documents from both the national and local tax bureaus where we lived, which meant taking a trip to Narita as well as a trip into Tokyo, since we lived in Arakawa Ward for the first six months of 2011. In Narita we could also go to the local branch office of the Justice Ministry to obtain records on the land we were planning to buy–history of ownership as well as the official registered survey map of the plot, or, in our case, plots, since the land we were buying was actually two adjoining lots, one about 200 square meters and the other a mere 20 square meters. This smaller plot would prove to be a hassle, but more on that in a later post. On Tuesday we took a trip to Narita to get the documents we could. Read More

Home Truths, August 2013

CIMG2664Here’s this month’s Home Truths column in the Japan Times, which is about the Chiba New Town development project, where we happen to live. To clarify something that may not be apparent in the article, it’s a very nice place to live. As pointed out, the people who reside here enjoy a mix of urban convenience and unspoiled nature, though one of the points we tried to make is that if the New Town scheme had gone ahead as originally planned, it might have been more congested and less attractive, but it was never going to happen that way because of the area and the way it was developed. As it is, the urban sectors have plenty of well laid-out parks, the roads are all lined with wide sidewalks and bicycle lanes (which few people use since everyone drives), there are plenty of retail outlets offering a wide variety of very cheap merchandise, and just minutes’ walk from any station in the NT area you are in deep countryside: rice paddies surrounded by well-kept forests. And while the Hokuso Line is expensive, it is extremely convenient to both central Tokyo (one hour to Nihohbashi without transfer) and Narita Airport (20 minutes), and, probably because it is expensive, it’s never crowded.

Based on a rough survey of the land being developed now for residential homes, lots of approximately 200 square meters will be going for ¥10-15 million, or about ¥50,000 per square meter. So far, tracts being prepared are located 10 to 25 minutes by foot from Inzai Makinohara Station. We haven’t seen too much land being prepared near other stations. When the project started in the 70s, condominiums were promoted, and there are still some large condo complexes near the various stations in the NT area that have vacant units. One, called Doors near Inzai Makinohara Station (five minutes), is only about half filled. Apartments were first put on sale more than two years ago, and since then the developer has decreased the price at least twice, which probably upsets people who already bought. You can get a brand new condo of 70 square meters for only ¥19 million, but if you go a little farther from the station you can probably have a house built for less than ¥10 million more than that. UR, who will be selling most of these plots to real estate and housing companies, will want to get as much money as possible in order to pay down its debt, but with so much being developed at one time and demand unknown, it’s likely that those prices will come down in a short period of time. Chiba, of course, is the cheapest place to live in the Tokyo metropolitan area, and since its population decreases every year, it will become even cheaper just for that reason. Though the New Town has been a failure in terms of what a New Town is supposed to accomplish fiscally, Chiba New Town is a reasonably priced, attractive alternative to its counterparts in other places in the Kanto area. And now that we think about it, maybe that’s the reason Inzai was selected as the most comfortable city in Japan.

Dancing to architecture

Kazumi Arai

Kazumi Arai

When we first met the realtor who was selling the land we were interested in at the actual lot, he brought with him a rough visual of the sort of house that could be built on it, along with a mock loan repayment scheme to show how cheap the monthly payments could be. At that point we hadn’t talked about our financial situation or what sort of house we wanted to build, and if we were impressed by the agent’s proactive salesmanship we were also leery of what it might lead to. Of course he wanted a sale on the land, but at ¥5.3 million his company wasn’t going to make a whole lot of money on the deal. What they wanted was also to build our house for us, and help us secure a mortgage. They were basically acting as developers, and had purchased this tract of land (relatively cheaply, because it was still being “adjusted for urban zoning”) with the idea that they could broker deals for houses and make even more money. Later, we would find out that of the five houses already constructed in the subdivision, only one had been built through the realtor. What impressed us about their offer wasn’t the forward thinking but rather the price. The agent said they could build us a house for ¥300,000 per tsubo (3.3 square meters) of floor area. In our mind we estimated that we wouldn’t need more than 30 tsubo, which means they could build us a house for ¥9 million, which was well within our budget. So while we didn’t say we would work with his company, we didn’t say we wouldn’t either.

We were still interested in using a housing company headquartered in Ibaraki called A-1, which we wrote about here in early 2012. Last winter, in fact, after we abandoned our plans to buy a used house or condo and renovate it, we rented a car and drove to their offices near Kasumigaura and interviewed the company president. Kazumi Arai comes across as more of a business philosopher than a businessman, someone with a vision who has assembled a staff that can realize his vision in a practical way. (Later, we learned that Arai has an architect’s license) The explanation he gave us of his company was almost identical to the one he gave to The Japan Times, which is where we first learned about A-1, and, frankly, it was the philosophy that attracted us. Arai’s position is that owning a house should not be an impossible dream, but because of the cost of land in Japan and the way the housing industry is structured, the average person looks upon it as an almost insurmountable financial undertaking. He believes people pay way too much for homes. A-1 keeps costs down in a variety of ways, mainly by cutting promotional budgets. The company does not advertise. It does not build model homes. Also, it is mainly a design company. It offers several basic floor plans that range in price from ¥9 to ¥11 million, and the customer then tells the architect what he/she wants. The architect amends the basic design accordingly, which means A-1 makes money on the design aspects, but it also helps the customer save money on materials. For instance, most major home builders’ designs have lots of rooms and walls, which add to the cost of a house, but A-1 points out that hallways are often unnecessary, and if the layout is carefully considered fewer walls can be built without any loss of privacy. In addition, their workers are trained in a variety of skills to save on labor costs. For each job, a builder usually has to hire someone skilled in that particular trade, be it plumbing, dry wall, whatever. A-1 tries to hire as few people as possible. Read More

Back to the land (3)

CIMG2494Having lost interest in the land in Makinosato, we felt as if we’d retreated to square one. There was still that lot near Shimosa-Manzaki station, but besides being really cheap it didn’t offer anything we could get excited about. Our disinterest was rooted in the same feeling that made it easy to drop the Makinosato plan: We didn’t really want to live in a subdivision, though we also understood that if we wanted to remain in this particular stretch of Chiba Prefecture and weren’t going to pay more than ¥5 million, the only lots we could afford were in subdivisions. This feeling turned to something like despair when several large tracts of land close to our train station were suddenly opened for development. As mentioned elsewhere in this blog, we live in what is called Chiba New Town, which stretches across parts of three cities in northern Chiba Prefecture. As a housing and commercial project developed by the government housing authority in the 1960s and 70s, management eventually fell to the authority’s semi-private successor, UR, which was stuck with a lot of land that was never developed because Chiba New Town didn’t attract residents and businesses in the numbers the government originally envisioned. But the government has also given UR a deadline to get out of the land development business and that deadline is next March. So suddenly, all these overgrown fields bordering the Hokuso Line are being bulldozed and subdivided, and several weeks ago housing companies and real estate agents started advertising the plots, which start at about ¥11 million for 200 square meters. So even though there will be hundreds of plots made available soon in subdivisions we would probably prefer not living in, we at least have to double our land purchase budget in order to buy one.

So after a short respite we resumed our seemingly endless Internet search, checking portal sites for anything–land, condos, used houses–that might offer us something appealing. In terms of land, we increased the budget to see what was available. Portal sites have series of buttons you check to narrow the search, and land prices are normally tiered in multiples of ¥5 million. In the past we’d input the very smallest amount, but now we broadened the search to ¥10 million in the areas we were interested in. There was a lot more available, obviously, and since we’ve been at this thing a while we’ve become better at rejecting properties without looking too closely at them. Read More