Pamphlet from local government explaining how property is assessed
We’ve written about Japanese property taxes a few times and in our JT column we once mentioned that the system for assessing property values and calculating the amount owed is complicated. Consequently, local governments, who do all this work based on laws implemented at the national level, sometimes make mistakes.
Apparently, the problem is even more widespread than we thought. According to a survey conducted by the Ministry of Internal Affairs, between 2009 and 2011, 97 percent of local governments reported at least one case of overcharging for property taxes, though, of course, that would indicate there are probably many more cases. A recent issue of the tabloid-style weekly Friday interviewed an official from a support network for “asset preservation” who pointed out that property taxes are very different from income taxes in that they are completely determined by the authorities. With income taxes, at least the taxpayer can see how his taxes are calculated since he has the documents with all the pertinent information. But property taxes are determined by the local tax office and the property owner simply receives a bill every year saying how much he owes without any explanation of how the bill was calculated, and unless the taxpayer has knowledge about the property tax laws and how they may apply to his particular circumstances, he won’t know whether or not the amount charged might be wrong.
The extent of the problem was illustrated in a feature in the Oct. 5 Asahi Shimbun, which cited a number of recent high-profile cases. Last May, the owners of apartments in a complex in Isehara, Kanagawa Prefecture, found out that they have been paying too much property tax for their units since the complex was built in 1972 by the then national housing corporation. Condominium values are assessed according to floor area, and almost all of the 600 units in the complex are about 63 square meters, but they also have verandas. The city tax office was including the verandas, which are about 8 square meters, into the assessment, but verandas are considered kyoyo, or common property, meaning they don’t belong to individual owners, but rather to all the owners, just like corridors and building foyers. The assessment for common property in a condo is divided up among all the owners but taxed at a much lower rate than property that is owned individually. Read More
Last Wednesday, NHK’s in-depth news series, Closeup Gendai, covered the issue of abandoned houses (akiya) in Japan, a topic we’ve addressed several times on this blog. Though the report left out a number of points that we think are essential to the discussion, there is only so much NHK can cover in half an hour, and what they did cover was well considered. Of the major broadcast media, perhaps only NHK can do this since they do not have to worry about offending advertisers. Right now house manufacturers and developers, both of which rely on new housing construction for their livelihoods, buy huge amounts of broadcast time. Certainly the most important point that NHK made in the report is that the nation’s focus on new housing as a means of keeping the economy afloat is not sustainable.
The program reiterated a lot of statistics that we’ve already reported, in particular the figure of 7.57 million homes–single-family houses and condos–that stand vacant in Japan. That’s 13 percent of all residences. Of these, 1.81 million are classifed as being abandoned, meaning not only are they vacant, they are not for sale or rent either. They are just sitting there, about to collapse, all the while attracting garbage and arsonists. Thus they are not only eyesores but safety hazards, and the source of complaints by neighbors, who ask their local governments to do something about them. As we discussed in an earlier post, some localities have passed regulations that allow them to confront the problem, which is difficult to do because, as NHK pointed out, there is a “taboo” against public entities forcing themselves into matters having to do with private property. The model of this new public action is the city of Daisen in Akita Prefecture, where, as of 2011, there were 1,415 akiya. The problem was so bad that the city passed a law allowing authorities to demand of owners that such firetraps be torn down and if the owner did not respond then the city can move in a carry out the demolition itself. Sixty-one houses were initially targeted for action, but so far only two have actually been torn down. The main problem is locating the owners. As it turns out, many have never even registered the properties, which, of course, is illegal, and the first question that we thought of was: If a house was not on the city rolls, it means the owner never payed property taxes, so what was the city doing all these years? NHK didn’t ask that question. It did find the owner of one derelict house who said he had inherited it from his aunt but didn’t have the money (¥700,000) to tear it down. He thought he might be able to sell the land and then use the proceeds to pay for demolition, but he couldn’t find a buyer. So the city tore the house down and, presumably, absorbed the cost. Though the program didn’t say as much, it seems obvious that such a small city cannot afford to tear down every abandoned house in its jurisdiction. Read More
“Property prices go up and down, but the main thing is not to pay them a blind bit of notice, unless and until you have a good reason to move. I learnt that a rising price will not rise forever; that when prices stop rising, it will be difficult to sell your flat, because the reason the price has stopped rising is because the climate has changed. The money you have in your house is not liquid money; it’s not money which can easily be converted into something else other than your house. It’s stupid to feel richer beause the value of your house has gone up, since the resulting rise almost always isn’t money you can use or spend. If you’re going to move, you still need somewhere to live, and the cost of that place too will have gone up, so there will be no net gain from the increase in your property’s value.”
In the above passage from his book about the credit crunch, I.O.U., John Lanchester is mainly talking about the United Kingdom, where he lives. However, his remark about needing somewhere to live and the notion that property value means little in the world where most people do live has stayed with me. Elsewhere in the book he tosses off the idea that the value of your house or apartment or land is only as much as the other guy is willing to pay you for it, in the end. Read More
Our Home Truths column this month, which appears in the Japan Times today, is about property taxes, a fact of economic life that is taken for granted. As we imply in the article, most first-time home buyers don’t really take taxes into consideration when they embark on the biggest purchase of their lives, presumably because, like death and…well, taxes, it’s something you can’t avoid so there’s no reason to worry about it. And maybe it isn’t, depending on where you buy property. Outside of large cities and productive suburbs, property taxes can be minimal. What we found troubling, and the reason we decided to write about it, was the frequent looks of bewilderment we received from real estate agents when asked how much a particular property would run a buyer in terms of annual taxes. Some knew approximately, but some said they didn’t know at all and would check at the office (and then never called back because they sensed–rightly, in most cases–that we weren’t that interested in buying in the first place). This was odd in more ways than one. In the most significant way, property tax should be something a realtor knows by heart, since it has a direct bearing on the financial ability of the buyer to maintain whatever loan repayment schedule he or she will be responsible for. In a less signficant but more bizarre way, many real estate companies actually print the annual property tax levy in the ads for properties, so for their agents to profess ignorance is just downright laziness, and also indicates that none of them are ever asked such questions by potential buyers. In other words, the inevitability of property taxes has rendered them a moot concern; maybe people just prefer not knowing. Read More