…the further they fall

Elsa Tower 55

Continuing in the vein of our previous post, last August the weekly magazine Shukan Gendai ran an article that revealed an “unwritten” belief among real estate agents in the Tokyo metropolitan area that says tower condos will start to “fall into ruin” starting in 2022. The choice of terminology is interesting here and, apparently, quite literal in that the towers themselves will start to deteriorate in ways that will make it difficult to maintain these buildings for many years into the future. The article describes in credible detail how tower condos differ from other condos, in terms of both structural design and real estate value, and how these differences manifest over time.

Gendai starts out with a profile of a tower condo that was built 15 years ago, or around the time that tower condos were making their debut in Tokyo and surrounding areas. Unfortunately, the article doesn’t say exactly where the condo is, but it contains 400 units, of which only 30 percent are occupied at the time the article was written. The facade is riddled with cracks and the entrance to the building is surrounded by overgrown weeds. The building also has a gym, which apparently has been closed for several years already. The current residents are described as people who have “nowhere to go,” thus implying they would like to move if they could, but the value of their properties has dropped so low that even if they were able to sell their apartments they wouldn’t receive enough money to cover a down payment on another condo. And yet, as the article attempts to point out, the overall popularity of tower condos in Tokyo is currently peaking.

As we previously wrote, tower condos are defined as collective housing complexes of at least 20 floors. Between 2008 and 2017, 341 new tower complexes were built in the Tokyo metropolitan area comprising 111,722 units. It was, according to Gendai, a phenomenon that “no one could have imagined” and, in fact, may have been too good to be true. Realtors have always been suspicious of the tower boom, since there was the obvious danger of oversupply, but to developers towers were the geese that just kept laying golden eggs, so they kept building them. Presently, they are still being erected in the Tokyo harborfront area on landfill, and in suburbs that are conveniently situated for easy access to the city center, such as Kawaguchi in Saitama Prefecture and Musashi Kosugi, which was described in our previous post. Now, some ambitious developers are eyeing certain areas of Tokyo for “redevelopment” with tower condos, such as Tsukishima, which is filled with older low-rise buildings. Read More

Owners before tenants

This week our Media Mix column is about a housing-related issue, the Leopalace21 scandal that has been brewing for more than a year.

The Link to the article is here.

Suckered

Recently, we were near Gotanda Station on the Yamanote Line and decided to check out an abandoned property that’s been in the news lately. This piece of land, which still has an old-style Japanese inn (ryokan) sitting on it unused, is about five minutes by foot from the station, overgrown with weeds and other vegetation. It covers 600 tsubo, or almost 2,000 square meters, and thus is worth a lot of money. Many developers would love to get their hands on it. One, Sekisui House, thought it had. Almost 2 years ago it signed a contract with a company that claimed it represented the owners, and Sekisui transferred ¥6.3 billion to the company before finding out that the company did not represent the real owners. Since then there have been arrests and stories in the media about this particular instance of jimenshi (real estate swindle), but so far the money itself has not been recovered, and some of the main players may have gotten away.

In the past few months, the story seems to have died down. When we walked around the property, which is surrounded by a deteriorating mortar wall and a makeshift fence, we came upon a dozen or more people assembled around a standing ashtray, smoking, on the street that lies between the property and the river, at the base of a bridge that crosses the river. At first we thought it was a strange place to put an ashtray since there weren’t any office buildings right there. These days, many companies don’t allow smoking in their offices and so employees who do smoke have to go outside. But then we realized that these people were not workers at nearby companies. Most seemed to be reporters who were hanging around just in case something happened at the property. Obviously, the story is not dead, though we had to wonder what the reporters were actually waiting for. 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

Kill Your (Vacation) Landlord

Judging from the amount of coverage it’s received from the domestic and foreign press, Airbnb’s decision to remove 80 percent of the properties from its Japanese listings is a big deal. That wouldn’t be surprising except that previously the Japanese press, at least, didn’t seem overly interested in the house-share service. What makes it news is mainly timing. On June 15, the new Minpaku Law, which regulates the short-time rental of private property, goes into effect, right before the vacation and tourist season starts. Apparently, Airbnb, nervous about a government crackdown, decided not to take any chances and dropped listings of properties that couldn’t prove they had already received permission to operate under the new law. That means people who had made reservations at these properties in the past are out of luck unless their owners can somehow get a license to operate by the time the visitor is scheduled to occupy the room or home. Some people are blaming Airbnb itself for, presumably, not being prepared for this sort of outcome, which has been apparent at least since the beginning of the year. Whether the visitors who made reservations have gotten the message isn’t clear, but it’s likely that, come next month when they show up in Japan after having spent money on air fare and other vacation-related expenses, they may find themselves locked out of the place they thought they would be staying at. One can imagine scores of foreigners wandering the streets of Tokyo and sleeping under bridges. Thank God it’s a safe country.

Seriously, though, the Minpaku Law, regardless of how poorly it was conceived and written, was inevitable, and its purport with regard to Airbnb is hardly limited to Japan. What makes it momentous, and, in the long run, perhaps prescient, is that it adds a layer of national intent to locally enacted rules that weren’t being enforced very strongly before. In other words, Airbnb didn’t take local regulations at face value until the central government said they supported them through the law. Ostensibly, the reason for the stricter definitions is public order–protecting communities where property owners rent out rooms to strangers. Less obviously, the Minpaku Law supports the powerful hotel and innkeepers industry, which has been calling for the banning of peer-to-peer short-term rentals. And even less apparently, but no less potently, the law favors another powerful lobby, the real estate industry, which can use the law to corner whatever market is left of short-term vacation rentals, since many of the rules call for oversight by corporate entities, or, at least, entities that act like corporations.

The Minpaku Law essentially covers two types of properties. The first type is a property that has applied for and received the proper permits, meaning they comply with the hotel law. From the outside, they may look like a regular private residence, but inside they adhere to fire regulations and there is someone who manages the property on site. Minshuku, capsule hotels, and guest houses fall into this category. The second type are properties that heretofore fell into the so-called gray zone, rooms that did not comply to the hotel law but weren’t really breaking any laws–until now. Though fire laws and other related safety regulations will presumably be more strictly enforced for these properties, the main difficulty will be stricter enforcement of zoning laws, which are locally enacted. The main blanket, national rule is the one that says minpaku can only rent out rooms for a maximum of 180 days out of the year. Also, if the property is in a condominium, the owners association must be apprised of the existence of a minpaku and approve of it in writing, which may end up being the most difficult condition to satisfy, even when localities don’t prohibit minpaku from residential zones. Read More