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

Notes from underground

One of the older neighborhoods in Inzai without utility poles.

In recent weeks, we heard that the city where we live, Inzai in Chiba Prefecture, has become notorious for something. This has happened before; in fact, it’s happened several times. Though Inzai is about as nondescript as a Tokyo suburb can be, it occasionally pops up on the news for some reason or another. Earlier this year we were the butt of jokes because of a PR video produced by the city that had gone semi-viral because of its conflation of the name “Inzai” with the word “Indo,” which is the Japanese pronunciation of India. The video, fashioned after a low-budget Bollywood production, featured Indian tourists supposedly flocking to Inzai because they somehow mistook the city for their home country. Yeah, it deserved all the derision it attracted, and not just for the bad humor. More often, however, Inzai gets cited as one of the most “livable” cities in Japan for reasons we’ve talked about before and don’t need to get into again.

This latest blast of fame apparently originated on the prime time TBS information program “Newscaster,” which ran a mini-feature during its “7 Days” weekly review segment in September about all the homes on the Boso peninsula that had lost electric power during and following Typhoon Faxai. The main problem was that the strong winds blew over utility poles, many of which were in poor condition due to neglect. Because of all the work involved in getting utility lines back up, some sections of Chiba Prefecture didn’t have power for more than two weeks. In order to illustrate what could be done in the future to avoid such disasters, TBS visited Inzai, where a lot of new single-home construction is currently taking place. They went to one development near Inzai Makinohara Station on the Hokuso Line, the same station we use, because this neighborhood did not have utility poles. All the electrical cables are underground. Burying cables is the norm for most of the developed world, but Japan is way behind. In Tokyo only 8 percent of cables are buried; in Osaka only 6. In Hong Kong, London, and Paris all the cables are underground. Read More

Sky’s No Limit

Last week the government released population figures for 2017 and to nobody’s surprise the Tokyo metropolitan area was the only region that saw any increases. Given that Japan’s overall population is dropping, it was notable that the three prefectures surrounding the capital saw increases, even if they were very slight.

It would be interesting to know how much of these increases were attributable to the construction boom in so-called tower mansions, or high-rise condos. Two weeks ago, NHK aired a look at the boom that attempted to weigh the merits of high-rise living with the demerits. Until recently, most of the tower condos, which the program defines as a building of at least 20 floors, or 60 meters, were being built on the Tokyo waterfront, but now they are popping up like spring bamboo in satellite cities like Kawasaki, Saitama, and Kashiwa, because local governments are encouraging developers to build them with subsidies. In 1999, the year before national building regulations were eased, there were only 150 tower condos nationwide, but by 2016 there were about 800.

The NHK show was particularly interesting to us, not only because we once lived in a high-rish in the shitamachi district of Tokyo (we rented, though), but also in the past resided in the two cities that were profiled in the report, Kawasaki and Saitama. In the case of the latter, when we lived there it was before the merger of Urawa and Omiya, and there were no tower condos near Omiya station, one of the biggest transporation hubs on the Kanto plain. Now, within walking distance of the station, there are 2,700 relatively new condo units in skyscrapers, and they’re very popular, it seems. A new building that recently opened has 776 units and they all sold out almost immediately. NHK visited one couple with two kids who bought their 3LDK, just four minutes from the station, for ¥50 million two years ago, which is about ¥10-20 million cheaper than such a place would cost in Tokyo. The wife works in Takadanobaba and the husband in northern Saitama prefecture, so their home is right in the middle. The say they are “100 percent” satisified with their purchase, and NHK attributed the popularity of tower condos to the kind of facilities they offer. This particular building included a gymnasium, a theater room, a music room, hotel rooms for guests, a dance studio, and lots of amenities. Read More

Low priorities

DSCF2013It’s become an almost trite litany in the media: the poor become poorer and the rich richer, with the middle class mostly shrinking and absorbed by the former. The conventional narrative says that free market capitalism makes this so, as governments in the free world become “smaller” and thus less likely to regulate economic functions. But more fundamental to the issue is the idea that priorities are shifting away from the poor.

An article in the Dec. 3 Nihon Keizai Shimbun reports on a survey completed by the Ministry of Internal Affairs and Communications in September and just released to the public. The survey collected data from local governments regarding public buildings, including apartments and schools. One of the more startling statistics is 12,251, which represents the total number of these buildings that local governments throughout Japan, both prefectural and municipal, want to tear down. The estimated cost of this mass demolition would be ¥403.9 billion, a huge burden for municipalities, most of which are cash-strapped anyway. But the cost of maintaining these buildings is probably higher, since it’s an ongoing expense. The reasons local governments want to tear down these buildings is simple: they’re old–the average age is 41 years–and the population is expected to continue decreasing. This number doesn’t include buildings that will be renovated or replaced after they are destroyed. It’s only buildings that will be gone for good. At the time the survey was conducted, 40 percent of these buildings were in use, while 47 percent were not in use at all and were thus shuttered. As far as plans for demolition go, 32 percent will be torn down “within a year or two” while the fate of 41 percent was “not known” at the time.

It’s a huge number, but if you’re at all familiar with construction trends in Japan it’s probably not shocking. Just walk through any business district in Tokyo and marvel at how many new skyscrapers are going up, replacing other buildings that were put up only thirty or so years ago. Buildings in Japan are notoriously short-lived, and, of course, outside of the large cities there is even less reason for keeping buildings that no longer serve a function. Populations and tax bases continue to shrink, so there is no need to maintain a school that has no students, or a public housing project that’s only 30 percent full. Read More

New values

CIMG2031Earlier this week the national tax agency announced that, on average, land values throughout Japan went down 1.8 percent, raising hopes in financial circles since it’s the lowest drop in a long time. Any sign that the economy is improving is given a lot of play in the media, though a closer reading of the statistics indicates it may not be what it seems. As almost all the stories point out, the main brake on the drop in property values was the sudden surge in sales of luxury condos in the major cities. If you discount those sales, much of which is being spurred by overseas investors, the drop in value is pretty much the same as it’s been for the past decade or so. In Asahi Shimbun’s coverage, a reporter talked to a 37-year-old salaried worker who was looking to buy a used condominium in Ichikawa, Chiba Prefecture. He found one that was very cheap and only 10 minutes from Motoyawara Station, but was disappointed by the “undeveloped” quality of the neighborhood. A local realtor told the reporter that his business has not changed at all. Property values in the area are 4.7 percent less than they were a year ago, when the values were 4.4 percent less than they were in 2011. “The only place that’s any good is the center of Tokyo,” he said.

Another realtor in Kofu, Yamanashi Prefecture, told the paper that the value of properties near the main train station declined 3.8 percent over the previous year, and he didn’t sound hopeful, citing the fact that there has been no increase in the last year of “inquiries for home remodelings” that actually lead to contracts for work. “That’s because nobody’s income has increased.” The media was expecting a rush on home sales prior to the increase in the consumption tax next April, and until May, housing starts rose year-on-year for nine months straight. That statistic may go south, however, since there is a suspicion that interest rates will also go up in line with the government’s monetary easing policy, thus discouraging some potential new homeowners. Almost everyone Asahi talked to, from realtors to securities analysts, believe that the situation won’t change significantly unless average people start making more money.

Comeback

housestocks13Last week Tokyo Shimbun published a brief piece about possible good stock picks for next year, and it seems most analysts in Japan are saying that anything related to housing is a good bet. “It’s one of the few industrial sectors with promise,” said one. The main reason, as we’ve already mentioned in our other blog, is the consumption tax hike. It’s assumed that many people who are considering buying a home will want to beat the rise in the rate, which means they will have to sign a contract for the home sometime in 2013 since the rate will go up from 5 to 8 percent on April 1, 2014, so the completed house or condo has to be “transferred” (hikiwatashi) to the buyer before that date if the buyer wants to avoid the higher tax. Consequently, a lot of people will be trying to buy a home at the last minute. (Land sales are exempt from the consumption tax)

According a construction research laboratory attached to the land ministry (obviously an amakudari outfit), the number of new homes that will be built in 2013 will exceed 921,000, the first time the 900,000 mark has been breached in five years, representing a 5.2 percent increase over this year. Consequently, two other economic research centers, Nissei’s and Daiichi Seimei’s, project investment growth in the housing sector to grow by 10.8 percent and 11.4 percent, respectively. Two-digit growth in any sector is considered really, really good in this economy, and should benefit everyone from house manufacturers and condominium developers to realtors, lighting equipment makers, and construction material suppliers. The big house manufacturers like Pana Home, Daiwa House, Sekisui Heim, and Asahi Kasei (Hebel Haus), will rake in the most because they can respond to mass orders more quickly and thus help those last-minute buyers get their place built before the tax deadline.

It should be noted that this only applies to new homes, since the consumption tax is only levied on companies that make more than a certain amount of money. For the most part used homes don’t apply since most of them are transactions between individuals with realtors simply acting as go-betweens–which means you pay the tax on their fee, but not on the price of the house or condo itself. So, again, there won’t be much stimulus for the used housing market.