In real estate parlance, there is a term for people who are buying a home for the first time: ichiji shutokusha. In fact, there are homes that are specially designated for these buyers. Almost all are condominiums, and to qualify for the ichiji shutokusha designation they have to have at least 60 square meters of floor area and cost less than ¥35 million. To put it succinctly, they are designed for families and are cheap.
According to the Asahi Shimbun, in 2010 80,204 brand new condominiums designated for ichiji shotuksha were put on sale in the Tokyo metropolitan area. That’s a little more than 18 percent of all the new condos that went on sale in the area that year and a little more than one percent less than the number put on sale in 2009. In fact, the share of new first-time condos among all new condos in Tokyo and its environs has been dropping since the turn of the millennium. In 2001, they accounted for 38 percent of all new condos, and for the next five years the share remained in the 30 percentile range. In 2007, the share dropped to about 25 percent and has been steadily dropping ever since.
The Asahi article doesn’t analyze why this is happening, though one could get a fairly good idea of why such condominiums would become less popular. The above-mentioned criteria would exclude the vast majority of new condos built within Tokyo proper, which is where most people in the region work. The majority of first-time condos are probably located in the far suburbs on inconvenient train lines, which means that their value depreciates even more quickly than condos in Tokyo or other major cities. They are also more difficult to sell, thus contradicting one of the salient features of a first home–it’s appeal as an investment, as a stepping stone to a larger house down the line. The standard middle class narrative says you buy a first house young and then trade up to something better and larger as your family grows. But if the value of your property shrinks over time, that sort of upward mobility is difficult to achieve, since you’re not going to get as much money as you paid for it; and the longer you hold on to the property, the less it’s worth and the less likely you can use the sale money to buy a “better” place. At least with a detached home, the land value may at least stay the same, but there is very little land value involved in condo sales. And since developers are always building new first-time condos that are more appealing than used ones, it becomes almost a self-fulfilling prophecy.
The farther Japan gets from the bubble period of the late 1980s–the last time when condo owners believed the value of their homes would increase–the more likely first-time condo buyers will opt for something that they think they can live in their whole lives, and that doesn’t necessarily include condos designated for ichiji shutokusha. Or, at least, that’s our analysis.
It’s fairly well-known that Japanese people like new things, and if their budget allows they prefer buying a brand new house or condo rather than one that’s already been lived in. Half of the almost six million condominiums in Japan were built within the last 15 years, and reportedly the pace of construction is slowing due to the ongoing recession. According to statistics recently released by Reins Tower (East Japan Real Estate), sales of older condos also went down over the past year. Sales contracts were concluded for 1,943 used condos in August in the Tokyo Metropolitan area. That’s a 6 percent drop from the same month last year. However, the 920 sales in Tokyo alone represented a 0.9 percent increase over last year. The suburbs were a bit different, with Chiba seeing a 6.8 percent drop and Kanagawa a whopping 14.1 percent decline.
But that isn’t the whole story. While sales on the whole have gone down slightly, the average prices of the condos sold have gone up, as much as 4.6 percent in Saitama, for instance. What this would seem to indicate is that more newer used condos are being sold, since condominiums lose their value with time on a pretty consistent basis. In Tokyo, the trend is more localized. Sales of used condos in the three central wards (Chiyoda, Chuo, Minato) decreased by 15.4 percent, while those in the eastern portion of the city increased by 8.6 percent. Condos in the center of the capital are, of course, much more expensive that those in the eastern part, even though prices in central Tokyo have dropped 6 percent while those in eastern Tokyo declined only 1.4 percent (for comparison’s sake, prices in the western wards dropped the most, 8.2 percent, while those in the southwest–Meguro, Shinagawa, Ota–lost only 0.6 percent).
All indications point to a buyers market for used condos, which is hardly surprising. The stock is increasing. For the entire Tokyo metropolitan area, the available stock of used condos is 52 percent higher than it was last year, and in central Tokyo it’s gone up by 25 percent (all Tokyo by 35 percent). What this means is that it’s becoming more difficult to sell older condos, even in those areas like central Tokyo where it used to be considered easy to do so.
Here is a housing-related article we wrote for our sister blog at the Japan Times about a recent government study about reserve funds for condo repairs. It relates to a lot of the themes we have covered in this blog.
This baby’s only 40 years old!
Japan will shortly start paying for its shortsighted housing policy with a depressed real estate market that will probably never recover, according to findings by Nomura Research Institute. If the depreciation of home values continues at its current rate and the number of new home construction is the same as it was in 2003 (1.2 million units), then the vacancy rate for all dwellings in Japan will be 43 percent in 2040. And even if new home construction is halved over this period of time, the vacancy rate in 2040 will be 36 percent.
Of course, that’s a completely hypothetical situation and probably doesn’t reflect what will really happen since in 2015 it’s projected that the total number of households in Japan will start to decline. In 2008 there were 50 million households in Japan and 57.5 million housing units, meaning that the vacancy rate in that year was 13 percent. Read More
Statistics recently released by the Health, Labor and Welfare Ministry show that the number of single parents is on the increase, and has been since 2006. This makes sense since the divorce rate is also rising, but what’s makes the statistics noteworthy is that more and more single mothers are women who have either never been married or were married but gave birth after their marriage ended.
Right now, the ministry estimates there are about 1,520,000 households in Japan headed by single monthers, and about 200,000 headed by single fathers. Though the statistics are a bit old, the Ministry of Internal Affairs conducted surveys of “never-married” single mothers in 2000 and 2005, and between those two years the number of single mothers between the ages of 15 and 49 increased by 39 percent. However, when you break this number down by age groups, you find that the biggest increases are among women over 30: 57 percent for 30-34; 45 percent for 35-39; and 56 percent for 40-44. In terms of real numbers these increases don’t represent very much since the portion of children born out of wedlock in Japan is only about 1 percent. Read More
In summer there are fireworks festivals everywhere throughout Japan. One of the most popular is the one over the Sumida River in Tokyo. Every year about 1 million people show up. This year it’s taking place on July 31st. During the second week of July the authorities start to install fences along the river banks. The fences are to protect the spectators and prevent water accidents. In order to install the fences the people who erect blue tents (homeless poeple) on the terraces or along the paths have to leave and remove their tents. That means that during the festival the homeless people who live in these tents have to move somewhere else temporarily. In March 2010, the authorities said that there are 13,000 homeless people in Japan. That’s a decrease of 12,000 since 2003, when they counted the homeless for the first time. Both Sumida and Taito Wards counted 720 homeless people in their jurisdictions, and about 70 percent of them live along the Sumida River. They have nowhere else to go, but people who live nearby tend to complain.
The forecast is not fair
The government recently released new figures related to household income. As of June 2009 there were approximately 48 million households in Japan, each with an average 2.62 members. The average income per household was ¥5.475 million, which is ¥87,000 lower than the average in 2007. Household income in Japan peaked in 1994 at ¥6.642 million.
In terms of an aging society, there were 9.623 million households whose members were either all over 65 or a mix of over 65 and under 18. The average income of these households in 2008 was ¥2.98 million. Overall, 61.5 percent of the households earned below the average income, and 19.4 percent of these earned less than ¥2 million. About 58% of the respondents of a related survey said that “life is difficult,” the first time since 1986 that that answer represented the majority of Japanese. Read More