real estate business | Cat Foreheads & Rabbit Hutches

Putting on heirs, Part 1

On Jan. 23, the Asahi Shimbun reported that in 2021, ¥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 ¥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 ¥492 million. The safe in his home contained ¥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 ¥700 million. So the total worth of the estate was more than ¥2 billion.

Simple plans

Posted on January 19 by catforehead

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 ¥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 ¥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.

Condos can be akiya, too

Posted on January 4 by catforehead

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.

Mind the gap

Posted on December 10 by catforehead

*Yours in exchange for your first-born male child*

Tokyo real estate has become even more expensive, though it should be noted that it’s still reasonable when compared to other large cities in the world. An article that appeared Dec. 7 in the Tokyo Shimbun cited a survey about luxury condominiums where the price of a representative example in trendy Moto Azabu was pegged as the standard. If the Moto Azabu condo price is set at 100, then the price of a comparative condo in London is 181 and one in Hong Kong 218. (Masako: “And even with a luxury condo in Japan, you still get only one toilet.”)

Tokyo isn’t as expensive as most foreign media think it is, but even disregarding the usual markups for properties designed for so-called expats, condominiums in the capital are still out of reach for the average worker, and have become more so since the advent of the pandemic. According to the same Tokyo Shimbun article, the average price of a new condominium in the 23 wards in October exceeded ¥90 million. For sure, after COVID hit, more people decided that if they could telework, they’d rather live outside of Tokyo, but that didn’t really put any downward pressure on prices in the city center, which are not only popular, but extremely popular among rich people, the only socioeconomic layer that has seen an appreciable rise in income in recent years. In 2021, the average price of a new condo in the 23 wards went over ¥80 million for the first time since the bubble era, and in October the average was ¥93.65 million.

The main reason has less to do with COVID than with the Bank of Japan, whose president, Haruhiko Kuroda, implemented his infamous money easing policy when he assumed his position ten years ago. Since then, most of the cash that the BOJ has pumped into the money supply has ended up in the accounts of the very well-off, and they’ve used it to buy expensive property, thus pushing up prices across the board, but mainly in the high-end market. Add to this pressure the construction crunch that accompanied the Olympics, when labor and materials shortages made it more expensive to build anything, and prices of new apartments have outpaced the spending capabilities of the average Japanese family. Tokyo Shimbun quotes a 27-year-old “homemaker” who lives in Shinjuku with her husband and three children and frets that she wants to buy a new condominium in the area rather than “keep paying rent,” but that prices are way too high. “I want to move when the kids get settled in school,” she says, “but I want to live in central Tokyo and there’s nothing we can afford.” Dream on!

It may seem shortsighted to talk only about new condos in Tokyo, but the mainstream media has never been very interested in covering available stock anywhere but in the Tokyo metropolitan area. Still, for argument’s sake let’s leave the rest of Japan alone. If the woman cited above was herself employed and half of a “power couple” (at least ¥15 million combined yearly income), then she would not only be able to qualify theoretically for the down payment and loan conditions for a new condo in Shinjuku, but she’d be part of the demographic that was pushing up prices. Another demographic doing that is seniors with a lot in the way of assets. A real estate representative says that market growth is being spurred by people who already live in central Tokyo and want to “replace their present homes.” Redevelopment is progressing apace and the portion of the population that has this kind of money on hand remains stable. If these are mostly retired people, they are not the kind of retired people who sell their apartments and then move to the suburbs. They stay in the city center, and get a nicer place. They can afford it.

A real estate agent who mostly represents foreign buyers and whose network extends to 70 countries told Tokyo Shimbun that through May of this year, the number of inquiries they’ve gotten from real estate companies in the U.S. for Tokyo properties has nearly tripled since the beginning of the year, owing mainly to the drop in the value of the yen against the dollar. To Americans, Tokyo real estate is like one big fire sale right now, and buyers are snatching up deals in the most famous neighborhoods in the city—meaning, the ones whose names they’ve heard before—Shinjuku, Shibuya, Ginza, Roppongi. The truly wealthy are buying condos in the ¥500 million-¥1 billion price range, which, as mentioned already, is still cheap compared to other world class cities.

Planned Obsolescence

Posted on November 9 by catforehead

*Variable interest housing loan campaign from early 2020*

With constant talk of a looming worldwide recession, economic news tends to be gloomy, and each country has its own particular problems. Some financial commentators say that Japan’s interest rates remain ridiculously low compared to elsewhere, but no one seems to see it as an issue to fret about. A Nihon Keizai Shimbun article that appeared Nov. 6 tries to examine the matter as it relates to Japan’s overall financial health and the prognosis is not good.

However, the reason for Nikkei’s pessimism is rooted in a larger problem where interest rates play a part: Japan’s over-supply of housing. This blog has covered this topic every which way since it launched in 2009, and none of the conclusions reached by Nikkei are particularly fresh, but as Japan’s population continues to shrink and age they are more relevant than ever and bear repeating.

The main concern of the article is variable interest loans, which account for more than 70 percent of all mortgages in Japan. Variable interest means that the lender has the discretion of changing the interest rate during the period that the borrower pays back the loan, meaning it could go up or down at a designated time. The reason most people take out variable interest loans is that they charge lower rates in the beginning than fixed interest loans do. In Japan, housing loan interest rates are still absurdly low compared to the rest of the developed world. The lowest we could find right now is the 0.289 percent charged by au Jibun Bank, followed by Mizuho’s 0.375-0.675 percent. When people take out variable interest loans starting at these rates, they likely think that even if they go up, it won’t make that much of a difference, but actually it does. According to MFS, a service company that helps customers compare housing loan rates and conditions, a 0.1 point increase in the interest rate would lead to an increase of ¥110 billion in interest debt throughout Japan. In simpler terms, if your variable interest rate rises from 0.5 percent to 1.0 percent, your interest payments will double.

Such an increase wouldn’t necessarily be a problem if the asset value of the home being financed remained the same or went up, but in Japan, as we’ve said here many times, that isn’t the case. Conventional wisdom says that if your mortgage becomes too much to handle you can refinance the loan using your home as collateral, or sell the house, pay off the loan, and then buy something cheaper with the money left over. But in Japan, depending on how old the house is, it may be difficult to sell it for the amount needed to pay off a loan, which means the owner is at risk of going bankrupt if their personal financial situation changes for the worse due to loss of income, sudden severe illness, or whatever.

The Lie of the Land

Posted on May 14, 2022 by catforehead

Here is another chapter from our unpublished book about housing in Japan based on our own experience of trying to buy a home. This one is about residential land usage.

*Example of a private road built for a future* fukurokoji *housing development*

“It’s about the size of a cat’s forehead” – proverbial Japanese rejoinder when asked how much land a person owns

The real estate agent picked us up at the train station in a company car with long scratches on the side, probably inflicted during attempts to park in tight, unfamiliar spaces. We drove to the property through dense suburban sprawl overshadowed by pylons and interrupted by small plots of farmland.

The two-story house had royal blue siding and was sixteen years old. The owner moved out two years ago. The wallpaper was discolored, the laminate wood floors spongey, the second floor “veranda” filled with debris. The price: ¥5.8 million. We estimated it would take at least ¥6 million to make it livable, but ¥12 million for the whole thing seemed too much. Moreover, anyone who bought the house would have to assume the lease for the land, which was ¥38,000 a month.

The agent explained that the same landlord owned the property under the other four houses on the street. The owners all had them built at the same time and paid the same rent. The leases were 50 years, which meant the owner of the blue house was still paying rent even though he didn’t live there any more, and would continue paying rent until he found someone to buy the house and take over the lease. He originally wanted ¥12 million, but had come down to ¥5.8 million about a year ago. We asked what the options were if he couldn’t find a buyer.

“Oh, he could easily rent this place, depending on how much he asked,” the agent said. “Many people in this situation do that.”

This concept of owning a house on rented land, in Japanese called shakuchiken, isn’t uncommon. According to the land ministry, between 1993 and 2007, 35,492 single-family homes and 18,937 condominium units were built on rented land, a trend that peaked in 2001, when many companies in the Tokyo Metropolitan area starting selling off property, fueling a development boom characterized by cheaper condos. When prices rose after 2005, shakuchiken started becoming popular again. The agent said that the number of people building houses on rented land was increasing, “but you don’t see so many for sale.”

As a rule, the value of homes in Japan depreciates rapidly, but land is still expensive, and not just in urban and suburban areas. Because of usage laws that make it difficult to shift land designated for agriculture to residences, even the countryside can be costly.

We had decided to check out shakuchiken after talking to a friend, also self-employed, who had a house built on rented land seven years earlier. He and his family wanted to live in Kamakura, the trendy center of traditional culture located on the Miura peninsula just south of Tokyo, but were looking to rent since they didn’t think they could afford to buy a house there. A real estate agent directed him to a plot of land being developed by a housing company. The plot was owned by a local Buddhist temple.

Last Resorts

Posted on February 21, 2022 by catforehead

Here is another draft chapter from our unpublished book about our house-hunting adventure. This one is about second homes and so-called resort mansions.

One late summer morning in 2012 we were on the Tokaido Shinkansen super express and ran into a friend we hadn’t seen in years. He asked us if we were still living in Tokyo and we said we had moved some time ago because of the earthquake. He then asked what we were doing on the bullet train and we said we were on our way to Atami on the Izu Peninsula to look at some properties we might be interested in buying. He gave us a funny look. “That would seem to be the worst place to live if you’re afraid of earthquakes.”

True. Just the day before Japan’s Cabinet Office Disaster Council had updated its projections for a major earthquake occurring in the Nankai Trough, the deep indentation in the sea bed off the Pacific coast, and Shizuoka Prefecture, which contains Izu, was deemed the worst location in terms of projected casualties, though, technically, most of those casualties would be in the western part of the prefecture, not Izu. In any case, we weren’t completely serious about buying a place there. Having been frustrated in our search for a home we could afford, we were entertaining the idea of keeping our rental and buying a cheap old fixer-upper in a location with cooler summers. If our income situation worsened and we had to give up renting, then we would at least have a roof over our heads, and if things continued as they had been then we’d have a weekend/summer place. There are plenty of old dumps in the highlands of Tochigi and Nagano, or in the wilds of Chiba that can be had for under ¥7 million, though they’d require another ¥3-5 million to make livable. And during our search we noticed there were quite a few such places in Izu, too, mainly besso (separate homes), which we had avoided so far. Second homes tend to be built in specially designated developments managed by companies that charge yearly fees. Also, besso are usually impractical for year-round living, but since we weren’t necessarily going to be living in one year-round we thought we’d see what was available. And Izu is, as they say, the “Riviera of Japan.” More to the point, it’s cooler in the summer.

The good landlord

Posted on January 5, 2022 by catforehead

In our previous post, we talked about rent relief, and how the Japanese government had expanded its assistance to at-risk renters after the onset of the pandemic. As a result, the number of approved applications in 2020 was 34 times the number approved the previous year, though, in the end, it may not be enough since the people who need the money have to apply anew every three months up to a total of 12 or 15 months. Groups that advocate for at-risk households have tried to convince the government to make the relief open-ended, but the current limits are in line with government policy regarding public assistance, which, as once outlined by former Prime Minister Yoshihide Suga, is made available after an individual had tapped their own individual resources, and then those of their “community.” Government aid is the last resort.

An article published by the Asahi Shimbun on Jan. 5 gives some idea of what kind of assistance the “community” might offer in these cases. The piece profiles a 42-year-old landlord named Tomoyuki Matsumoto, who owns about 80 rental units in Osaka, Kyoto, and Tokyo. He rents the properties to people who may have difficulty finding places to live otherwise because they are poor and/or elderly. The article illustrates Matsumoto’s business model by describing one of his properties, a 3-story nagaya (town house) located in Daito, Osaka Prefecture, that’s more than 50 years old. The interior walls are traditional doheki (wattle and daub), the roof occasionally leaks when it rains, and the toilet sometimes overflows. The tenant, an 81-year-old widow who has resided there 3 years, doesn’t seem to mind these inconveniences because the rent is only ¥35,000 a month, which means she can live there on her national pension. Matsumoto shows up once every two months to collect the rent in person, which she finds very agreeable. As he tells the newspaper, having a personal connection with his tenants is very important to him, and as a result he responds to maintenance problems fairly promptly.

Harumi Flag Rising

Posted on August 21, 2021 by catforehead

Renovation work on the Tokyo Olympics Athletes Village that will turn the apartments into condominiums-for-sale won’t commence until after the Paralympics end in September, but already business media are exploring the future of the Harumi Flag residential complex, as it’s been dubbed by lead developer Mitsui Fudosan Residential. In the end, the various buildings will comprise about 4,800 units, and so far a bit less than one-third of those have already been sold. Since the Olympics was postponed in the spring of 2020, the date for moving into the complex has been moved back by at least a year to spring 2023, and there was talk that some buyers were angry because that means considerable added expense for them. Whether they have been offered a refund and an escape for their contracts isn’t clear, but, for sure, matters such as mortgage terms for the new condos and leases on rentals that the buyers may have to extend in the meantime could be serious hits to their bank accounts, especially given the current pandemic-affected economy.

However, those who have already signed contracts should be happy in one regard: the value of their condo seems to have gone up in the meantime, which means they got even more of a bargain than those who will sign contracts in the future. Condo prices in Tokyo have been steadily going up in recent months after dipping a bit last year, and it’s likely these increases will be reflected in the prices of the condos that will be put on sale starting in September. After the pandemic struck, sales activities for Harumi Flag were halted, which now seems like a good decision since Mitsui will likely be able to charge more. According to various real estate web sites, Mitsui will not put all the remaining units on sale at the same time, which would flood the market and bring the prices down. Though nobody seems worried right now that prices will drop over the coming months as more units are put on sale, the idea is to maximize demand as much as possible. As it stands, the units were already cheaper than comparable new condos on the waterfront by 30-40 percent, a situation that reportedly upset neighbors who paid premium prices for their apartments. The reason for the lower prices is that they are being repurposed and that the nearest train station is at least 20 minutes on foot (not counting the time it takes to get from one’s apartment to the ground floor), but also because Tokyo sold the land, which is reclaimed, to Mitsui and its partners at a 10 percent discount just because of the Olympics, a move that has also been criticized since Tokyo can’t really afford such largesse considering the larger-than-expected bill for the Games.

Dead houses

Posted on August 4, 2021 by catforehead

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.