Not what they paid for

In December, the Chiba city office of East Japan Railways (JR East) announced a change in the timetable for the Keiyo Line that would start in March. The Keiyo runs from Tokyo Station parallel to the Tokyo Bay shoreline south to Soga Station in Chiba city. It is the train line that services Tokyo Disneyland and the Makuhari district of Chiba, which is the home of Makuhari Messe, one of the metro area’s biggest exhibition and convention facilities. The reason for the timetable change was the removal of the Commuter Express train, which does not make any stops between Shin Kiba Station in Tokyo and Soga, and which operated twice in the morning and twice in the evening. The Commuter Express would be replaced by local trains, which stop at every station on the line, but several Rapid Express trains would be added during off-peak hours in the daytime. 

According to the transportation-oriented website Impress Watch, the announcement was met with opposition from local governments affected by the Keiyo Line, including Chiba city’s and Chiba Prefecture’s. In addition, the major media covered the matter with an eye as to how the changes would affect commuters, many of whom demanded that JR East reinstate the Commuter Express. As a compromise, the company added two Rapid Express trains to the morning peak and two to the evening peak, which was highly unusual. Once a railway company changes a timetable they almost never change it back, even partially. However, the compromise may not be enough for commuters who rely on the Keiyo Line to get to their jobs in the capital. In fact, many probably bought their homes on the Chiba peninsula because of the Keiyo Commuter Express, which is why many real estate companies and residential housing developers are nervous about the timetable changes. 

JR East told NHK that the number of passengers on the line has decreased by up to 30 percent during peak periods compared to before the pandemic. There are a total of 18 stations on the Keiyo Line, of which 7 are not serviced by the Commuter Express and the Rapid Express. The company thinks that people who live near these stations are inconvenienced by the former express train timetables, and wanted to give them more opportunities to use the line. In addition, local trains have to wait at certain stations along the line for Commuter Express and Rapid Express trains to pass, thus further inconveniencing local train users. Though JR East emphasizes that they’re thinking about local line users, it’s their own bottom line that’s really at issue. Those who use the various express trains to get to work are already locked in as customers, so the strategy of the timetable change is to add passengers by increasing local runs and making them more “efficient” for those passengers. And on paper, at least, the difference in time doesn’t seem that bad. During peak hours, the local train from Soga to Tokyo, and vice versa, takes only 19 more minutes than the Commuter Express. 

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Condo, heal thyself

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 Â¥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.

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Capital means

One more 2023 story about living in Tokyo, mainly from a Tokyo Shimbun article published on Dec. 14. Counter-intuitively (if you read some of the more recent posts on this blog), statistics show that the number of households with children is rapidly increasing in the city’s 23 wards, and that more than half of these households have annual incomes that exceed Â¥10 million. More to the point, between 2017 and 2022, the number of households in the 23 wards where the breadwinner(s) is in their 30s increased by 20 percent, with median income being Â¥9.86 million. The main reason for the increase is the improved daycare situation. Remember some years ago when the main story about living in Tokyo was the dire shortage of slots in daycare centers? With the rapid rise of double income households, daycare became a make-or-break consideration for living in the capital, because there weren’t enough services or the services that were available were inconvenient. That problm has all but been solved. According to a 5-year survey conducted by the interior ministry, since 2017 the household income of married couples with children has increased, with couples in their 30s showing the largest increase, and those living in the 23 wards saying their incomes have increased the most. The median income nationwide of households whose breadwinners are in their 30s is now Â¥6.86 million, which represents a 13.2 percent increase from 2017 to 2022. However, the increase for the same demographic in the 23 wards was 23.4 percent. 

The main change over time is the predominance of double-income households with kids (as opposed to the derided demographic DINKS: double income with no kids). In the past, single-income households were the norm in the 23 wards, and it has been the availability of convenient daycare in central Tokyo that has attracted more double income households, which, as a block, has lifted the median income level in Tokyo. In 2017, 20 percent of all households nationwide that were waiting for a daycare opening were in Tokyo, accounting for 5,665 children. In 2022 the number of children in Tokyo on waiting lists had dropped to 32. According to one research company, income has increased on average for households with parents in their 30s at a much greater rate than for previous generations, owing to this combination of double incomes and available daycare. But at the same time the cost of living, especially in the 23 wards, has skyrocketed. Young persons with stable employment who desire to live in Tokyo and raise a family find that they are being priced out of their dream and alter their plans accordingly, with Â¥10 million being the level that determines their choices. They think that anything less will make having a family in Tokyo impossible. Tokyo Shimbun’s conclusion is that, unless employers “give up their idea of how to compensate their labor” there is no way that the birth rate will ever be increased. This is probably a simplistic way of looking at the issue, but it sounds logical. 

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Too much of not enough

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.

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Price is right, for the moment

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 Â¥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. 

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Resort resources

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 Â¥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 Â¥100,000. But Toyo Keizai claims that the average price for a resort condo in Yuzawa now is more than Â¥2 million. 

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Dead reckonings

Typical wooden apartment building

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. 

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Putting on heirs, Part 1

On Jan. 23, the Asahi Shimbun reported that in 2021, Â¥64.7 billion in assets were left to no one by people who had died. In other words, these people had passed away with no heirs and no will. In the end, most of this money will go to the national treasury. The amount mentioned is 7.5 percent more than the previous year’s amount, making it the highest ever recorded, and it will likely continue increasing until sometime after the baby boom generation dies off. As it stands, heirless assets have doubled in the past ten years and sextupled in the past twenty years, coinciding directly with the sharp increase in single-person households, many of which are occupied by seniors. In 2020, there were 6.71 million single-person households whose sole member was over 64, a 40 percent increase over the number in 2010. By 2030, this number is projected to increase to 8 million. Another reason for the increase is the decline in the rate of marriage. According to the Population Research Center, 28 percent of men over the age of 50 and 18 percent of women over 50 have never married. These portions are on the rise. 

The lesson that Asahi wants readers to take away from this information is that they should draw up wills as soon as possible if they haven’t already, especially if they have no children or family to whom they can or want to leave their money and property. 

When someone dies without an heir or will, any so-called interested parties can apply to family court for resolution, and the court will then appoint an executor to manage the assets. If the executor finds someone who they think deserves a share of the assets, say a caregiver or neighbor who may have been close to the deceased, those people may inherit something, but whatever is left over goes to the state. In 2021, 27,208 executors were appointed by family courts, another record. 

In order to explain the importance of legally binding wills, Asahi presents an example of a well-off man with lots of real estate assets who died at the age of 92 in Morioka with no heirs. His funeral was carried out by the real estate company he used in his property transactions as executor per his instructions before he died, and he gave the company Â¥20 million to set up a grave at a nearby temple. He also wanted to set up a foundation and a scholarship with his money. These instructions were done verbally, however, and later a court rejected this “will” because it wasn’t written down. 

The court instead appointed a lawyer to be the executor of the estate, who then acquired the keys to the man’s house and all his bank records. The money he had in financial institutions amounted to Â¥492 million. The safe in his home contained Â¥810 million in cash. His real estate holdings, including his own 1,500 square meter home, which was located 10 minutes by foot from the nearest station, were assessed at Â¥700 million. So the total worth of the estate was more than Â¥2 billion.

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Simple plans

Here is another chapter from our unpublished book about housing in Japan based on our own experience of building a home. This one is about the final preparations before construction of our house began.

The design came together quickly because it was so simple. In fact, we thought that whatever form it took it would never be simple enough. Each item that went into it was going to cost us, so we didn’t want a wall or a door or even an electrical outlet that we didn’t need. It’s one of the reasons we chose A-1 as the builder, because every plank and screw was subject to our approval, and while the simplicity of our basic idea made it quick and easy to plan, refining it took time.

The initial estimate was close to Â¥14 million, which was reasonable but more than we originally wanted to pay given what the land had cost. The A-1 design our plan was based on cost less than Â¥11 million. The difference was taken up by the design fee and some custom add-ons, like the extra toilet. So we scrutinized the plans. Did we really need a door to the office on the first floor? Would a mail slot be cheaper than a mailbox? Could we find less expensive lighting fixtures than the ones A-1 would purchase through its usual supplier? We weren’t being cheap for the sake of being cheap. Several decisions actually cost us more than if we had let A-1 go its normal route. The bathroom on the second floor did not have a standard vanity unit, which would have been less expensive than the built-in sink and mirror combo we requested. We gave in to the unit bath because on further inspection we didn’t think we would find a tradesman who could build the kind of Western bathroom we preferred at a price we could afford. As antiseptic as we found unit baths, they tend to have more structural integrity and are easier to maintain than custom-made bathrooms. And though we weren’t crazy about the standard system kitchen we’d been forced to choose at Housetec, we didn’t need to buy overhead cabinets since it’s an open kitchen. We also opted for sliding doors for the upstairs bathroom and the downstairs toilet, and they are more expensive than conventional hinged doors. Sliding doors take up less room, and at 89 square meters the house didn’t have any extra room to spare. We had already eliminated the “veranda” that tends to be standard in any Japanese home, and that saved us a lot. And since our house is essentially a big box there were fewer angles and thus less surface area. With A-1, real wood panel walls are standard, but for a bit more you can have conventional sheetrock walls, and for a bit less again you can have OSB (oriented strand board), which we chose for the walls of the office and the walk-in closet, since they would eventually be covered by bookcases and other furniture, so the look wasn’t important. Originally, we opted to leave out a UHF-BS antenna unit on the roof, thinking we’d get cable or Internet TV, but after calling around to various cable companies and internet providers we discovered that such services weren’t yet available in our neck of the woods. In fact, they might not be available for some time, so we opted back in for the antenna unit. In the name of simplicity again we asked them not to tile the genkan (foyer), but just leave it as bare concrete, and not just because it’s less money. We like bare concrete and since we included in the design a small recessed storage area just to the right of the genkan it would all be of a piece. We also wanted a lot of windows, which costs more than having less windows, though due to the usual “modular” Japanese design methodology, which bases all measurements on ikken multiples or portions of the length of a tatami (182 cm), we had to chose window sizes accordingly. Any other sizes would require custom work, which would mean going outside the modular parameters and spending more.

Another reason for the simplicity was that it would allow us to change things later more easily. Once everything was built it would be expensive, not to mention stupid, to change features we didn’t like, so rather than risk putting in something we might not like in the long run, we left out as much as possible. We’d be paying for whatever post-construction changes we made, but they would be easier to carry out and probably cheaper. A-1 wasn’t going to do any landscaping–no concrete apron or approach to the front door–and while those are always options they are options most homebuyers want because they think that as long as they’re building a house they should get as much done as possible. We may have been asking for trouble by leaving all that until later, but until the house was built it was difficult to make decisions that would have a permanent effect on the look and practicality of the property as a whole.

It was this aspect of the building process that was the most difficult to address. As we’ve already mentioned, one way A-1 saves money is by doing away with promotional schemes, including model homes. Building and maintaining model homes is expensive, and those costs add to the prices of the homes people buy. A-1 doesn’t see the necessity, and neither did we given how simple we were trying to keep things. But there is a big advantage to model homes, which is that the buyer has a clearer idea of what things will look like once the house is finished. We didn’t. A-1 brought us photos of other houses they’ve built with similar features to ours, but our design was unique, and so these photos could only give us an idea. Take the stairway. Though we thought it might be good aesthetically to have a metal stairway, it would have been very expensive, as much as a million yen more. Nagaoka showed us the standard wooden stairway A-1 installs and it looked nice in the house depicted, but that house is very different from ours. The fact is, we wouldn’t know what it would look like and what sort of practical improvements it would need until it was finished, so we wanted to keep all our options open until we could make choices based on reality.

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Condos can be akiya, too

Reviewing our posts on this blog for the past year or so, we noticed that much of our writing is related to akiya, or vacant housing, which has become an increasingly visible problem that the media is finally addressing. However, when we look at the statistics, we notice that akiya are not limited to single-family houses, which is usually how the problem is framed in the press, but, in fact, is mostly comprised of apartments and condominiums. 

The reasons for this lack of coverage may have to do with the fact that the image of apartments is that they are rented out, while the image of akiya is that of abandoned properties, so it’s difficult to imagine an apartment that temporarily does not have a tenant to be permanently vacant. However, condominiums are a different story since they are bought and sold, and for the most part when the press talks about the condo market they only talk about Tokyo, where apartments and condos are still in demand, even used ones.

But we found an article that appeared last spring in the business magazine President that covered vacant condominiums in depth, and, apparently, the situation is as dire as it is for single-family houses, even if the problem isn’t as visible. 

The article quotes a number of experts, including an economics professor, Hiroaki Miyamoto, who says that in ten years one out of every four housing units in Japan will be vacant, and that the majority will be collective housing units, meaning condos or apartments. The main reason will be the lack of funds available to carry out long-term repairs and renovations on older buildings, which, as a result, will fall into disrepair and become not only difficult to sell, but in many cases uninhabitable. 

To the international finance community, Japan is already considered a “pioneer” in the onset of permanently vacant properties, especially after the IMF conducted a study of the phenomenon in 2020. The outcome of the study was that vacant properties bring down property values in the communities where they are, and thus adversely affect regional economies. 

As we’ve noted a number of times, the Japanese government carries out a large-scale survey of the housing and land situation every five years, and according to these surveys the gross number of housing units in Japan continues to increase even as the population has leveled off and started to decrease due to the birth rate. In 2018, the last time a report was released, the number of housing units stood at 62.4 million, while the number of households was 54 million, meaning that there is a 16 percent excess of housing units. 

Until 1963, the number of households in Japan exceeded the number of units, but this ratio reversed in 1968 and ever since the number of units has continually increased in relation to the number of households. 

Moreover, 85.9 percent of households in Japan, or 53. 6 million, contain full-time residents, meaning that 8.79 million units, or 14.1 percent of the total, contain no residents, and almost all of these are defined as “vacant” by the government—8.49 million, or 13.6 percent of all housing units. A property’s “vacant” status depends on how much or often it is used. In that regard, the portion of vacant properties has been increasing since 1988, when the vacancy rate was 9.4 percent. 

President cites the methodology of the National Social Welfare Population Issues Laboratory, which has determined that the number of households in Japan will peak at 54.19 million in 2023, which also happens to be the year when the government releases the results of its latest housing survey. From now on the number of households will drop, and by 2040, the laboratory predicts the number of households will be 50.76 million, or 3.24 million less than it was in 2018. Extrapolating this trend further, the number of akiya will invariably continue to increase at an accelerating rate; that is, unless more properties are demolished.

As it stands, the number of demolished properties is also accelerating. Between 2008 and 2012, the number of homes demolished was 30 percent of the number of new homes that were built. Between 2013 and 2017, this portion increased to 62 percent. Nomura Research used this statistic to predict the vacancy rate for the future. If the 2008-2012 rate of 30 percent is used, the vacancy rate will be 25 percent by 2033 and 31 percent by 2038, but if the tendency shown in the change in the rate through 2017 is used, the vacancy rate will be 18 percent by 2033 and 20.9 percent by 2038. 

So while the vacancy rate will continue to increase, it could slow down if the rate of destruction of superannuated properties increases as well, but that isn’t a given, since new home construction isn’t slowing down appreciably. 

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