Viral market

Delivery of bathroom fixtures from Asia has been delayed

Since consumption has declined precipitously during the CV19 crisis, it’s no suprise that the real estate market has suffered considerably. The Nihon Keizai Shimbun has obligingly looked into the particulars, which are mostly predictable but worth looking at in detail. The Nikkei reports that people have essentially stopped looking for new homes, though the effect hasn’t been sustained enough to cause prices to fall just yet; and, in a sense, it might be better if prices did fall a bit, since that would encourage people who may be sitting on the fence to jump off and sign a contract.

The main problem at the moment is that people who have already signed contracts are getting cold feet, even if it’s too late at this point. Nikkei says that more than a few realtors it talked to have said they receive requests from customers to “disinfect” the used condos they buy, thus placing the realtors in a difficult position. As one agent told the newspaper, he understood the sentiment but how exactly he was going to convince the customer that he had cleaned the apartment “to their satisfaction” was going to be a problem. For people who had already signed contracts, it wasn’t a primary issue, but for those who were about to sign, the agent’s response could prove to be vital to the sale. A number of realtors said that more than the usual number of price negotiations had broken down since the pandemic developed. Demand is quickly evaporating unless something happens soon to change the situation. Read More

The now and future isolated

A superannuated New Town

Around the time the central government finally decided to declare a state of emergency to get people to stay indoors and help halt the spread of the coronavirus, we wondered if anyone would mention our pet peeve—tower condominiums—as an ideal residential accommodation for self-isolating individuals in Tokyo. The problem with living in a metropolis during an epidemic is that most people reside in collective housing, which makes it more difficult to not come into contact with others if you decide to emerge from your apartment. Consequently, the closer you are to the ground, the more insistent the urge to get some fresh air. High-rise apartment buildings make it that much more difficult to leave one’s home, since it requires getting into an elevator, which is the worst environment in a pandemic—cramped and unventilated—in order to come and go. So in a sense people who live in high-rises are already isolated to a certain degree, since, in our own experience as tower dwellers, such residents require more energy and initiative just to get out the door.

Novelist Jin Mayama doesn’t make this exact point in his essay for Asahi Shimbun that appeared April 18, but he comes close. He acknowledges that families will be trapped inside together for an indefinite period of time and hints that people in high-rises will be more stressed out owing to the cramped conditions. However, he sees this as a kind of opportunity, not so much for the residents, who are mostly stuck with their lot, especially if they bought their apartment, but rather for the rest of us who don’t live in high-rises. The epidemic puts the future of tower condominiums in a new light, or, maybe it would be better to say, a new shade.

Mayama predicts that the lot of tower condos will be strikingly similar to that of New Towns right now, which is that the latter have essentially become “slums.” Most of Mayama’s explanation mirrors what we’ve talked about at length in this blog, but it’s worth going through again for the sake of clarity. Collective housing is still a fairly recent trend in Japan, since it wasn’t anywhere near the norm, even in cities, before World War II. To him, the idea of collective housing as a social trend really took off in 1955, when the central housing authority started planning New Towns, which were based on a British idea but, physically, resembled Soviet apartment blocks. The New Towns were broadly covered by the media as being futuristic and progressive, and were instrumental in creating what was called “new families,” which, to Westerners, were basically nuclear families. Extended families, which had always been the norm and ideal in Japan, didn’t fit the new housing plan. Moreover, the New Towns epitomized the government’s drive to create a “100 million-strong middle class.” Read More

Harumi Flag at half-mast

One of the many negative economic by-products of the unavoidable decision to postpone the 2020 Tokyo Olympics for a year is the fate of Harumi Flag, the condo development project attached to the athletes’ village that was built on landfill in the Tokyo waterfront area. It was widely believed that the Olympics would produce a real estate bubble, but the coronavirus epidemic may have already prematurely burst that bubble. Harumi Flag will feature condominium towers, as well as schools and retail outlets to serve the large community that will be moving in after the games. The condos will eventually contain some 5,600 units and, in all, they are expected to attract more than 20,000 tenants, including renters. The entire area will cover the equivalent of three Tokyo Domes. Eleven developers are working together on the project headed by Mitsui Fudosan Residential.

For buyers, the complex has two attractions, according to a February article in Money Post: bragging rights that the units were once used by Olympic athletes, and cheaper prices. The average price of a new condo in the 23 wards of Tokyo is ¥80 million, which is about the same as it was during the bubble period of the late 80s. The median price of the 85 square meter units that went on sale earlier this year was ¥64 million. One real estate professional told the magazine that, per tsubo (3.3 square meters), the Harumi Flag units are 30-40 percent cheaper than new units in surrounding complexes. And a new 85 square meter unit in central Tokyo would go for ¥100 million at auction. A Tokyo municipal government researcher said that this may be the last chance to buy a new condo with the “big three” advantages—central location, large floor area, and affordable price. It’s the best place if you work in central Tokyo, and the schools will be very good.

Another attractive feature of the complex is that, because it is being built for Olympic athletes, the common areas are spacier and more comfortable. In particular, the elevators are larger. However, the negative points that have been pointed out are specific to the kinds of lifestyles of people who are buying the units. For one thing, transporation is not convenient. The nearest train station is Kachidoki on the Oedo Toei subway line, 20 minutes from Harumi Flag on foot, not counting the time it takes to get from one’s apartment to the ground floor by elevator. Mitsui says that there will be exclusive tandem buses operating between Harumi Flag and Toranomon during rush hour using a special lane, but until it actually starts it’s difficult to gauge how fast and convenient the buses will be. Given the density of the living conditions in the towers and the fact that they plan to operate twelve trips a morning with buses that hold a maximum of 40 people, they may not be enough. For that reason alone, one real estate journalist told Money Post that Harumi Flag is attracting few people who buy property as investments, since, in Tokyo at least, they usually aren’t interested in any apartment that is more than 10 minutes from a station. The same writer says that the initial Olympic legacy hook won’t mean anything ten years down the line in terms of resale value. Read More

Slipping away

That first step is a doozy: First world elderly problems.

Here’s a fairly common retirement strategy: The kids are gone and have families of their own, so the house you bought so long ago and which is likely paid for by now becomes too big, so you sell it and use the money to buy a condo somewhere in or near an urban center where public transportation and retail resources are easy to access. However, a recent feature in the weekly magazine Shukan Gendai warned people who are thinking of doing this to think twice. It may not be as easy as you think, and, in fact, it could end up being a disaster.

The number of people in Japan over the age of 65 recently exceeded 35 million, an expanding demographic that has become a target for real estate agents who are selling used or new condos, which tend to retain their value more readily than single-family homes. As it stands, many of these new retirees probably live in single-family homes in the suburbs of large cities to which the heads-of-household used to commute. These houses are likely two stories, a structural feature that becomes more of an inconvenience the older you get, and they are also probably far from public transportation hubs, meaning the people who live in them require a car to get around. Realtors use such reasonings to convince people to sell their homes and buy condos, and it makes sense, but not as much sense as it used to. First of all, there are just too many single family houses on the market and not enough people who want to buy them, and that disadvantageous ratio will only get worse as the population greys further.

Gendai also brings up the magic amount of ¥20 million, which is what a retired couple should have in savings to supplement their pensions. Actually, ¥20 million is probably not enough unless the couple is able to invest in some kind of financial instrument that can guarantee a small income, but most people still have their savings in time deposits, which generate almost no income, so the thinking here is that the couple lives off their pensions and doesn’t touch their savings since they may need it for emergencies. It’s a precarious way to live. Read More

Am I high?

Tower condos in central Kobe

Local governments are starting to realize the disadvantages of tower condos and doing something about it. According to a Jan. 3 article in Tokyo Shimbun, last July the city of Kobe implemented regulations that would limit construction of new condominium complexes in the city center. As mentioned in a previous post, last fall’s kanto area typhoons brought home to the residents of at least one tower condo in Kanagawa Prefecture the truth that high-rises were especially vulnerable to storms in ways residents hadn’t counted on. Western Japan has had more immediate encounters with typhoons in recent years, and that seems to have been part of the reason for Kobe’s new regulations, though the main impetus may be purely economical.

The new law covers land to the south of Sannomiya Station. For the 22 hectares closest to the station, all new residential construction, including single-family houses, has been banned. Then, in the surrounding area, for any plots of land that are 1,000 square meters or more in size, the capacity rate for new residential construction is limited to 400 percent. That means, for instance, if a building with a footprint of 500 square meters is built on these plots, it can be no taller than 8 floors. Tower condos are defined in Japan as being at least 20 floors, and usually they contain at least 100 units. Currently, Kobe has 69 high-rise condos, 24 of which are located in Chuo Ward, which is where Sannomiya Station, the main transport hub, is situated.

One of the reasons for these restrictions is that the city can’t provide all the services required for tower condos. The trend at the moment is for younger people to move as close to city centers as possible so as to be nearer to their jobs. They are willing to pay for such proximity because they understand, having grown up in the suburbs watching their fathers commute two or three hours a day to and from work, what that commute does to their lives. And a lot of these young people have families, but Kobe can’t provide enough schools in the city center. At the moment, in fact, many existing schools in the area have had to provide prefabricated classrooms off-site, because there is no land left in the city center to expand schools or build new ones, and one of the reasons is that there are so many tower condo complexes taking up room. For the same reason, there aren’t enough stores or other commercial facilities and, most significantly, there is a paucity of employment, which means, ironically, that the city center has become a kind of bedroom community for surrounding areas, including Osaka. Read More

…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

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