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 Friday, several media reported that the land ministry released a new white paper on land and property usage based on research carried out last year. The conclusion of the study is hardly earth-shaking to anyone who reads this blog, but it’s nevertheless noteworthy. The paper says that the market for older homes and commercial properties should be expanded by maximizing their value through renovation and rebuilding. Though the Cabinet Office’s recognition that Japan is overwhelmed by superannuated, deteriorating structures is a step in the right direction, it’s difficult to understand if anything can be done about the problem as long as policies for promoting new building continues as it is.
According to the government’s findings, more than 30 percent of office buildings in Japan are at least 30 years old, meaning they were constructed before current earthquake-proof standards were implemented. Consequently, 90 percent of “real estate investors” are not interested in these buildings. The paper recommends that they be quake-proofed in order to “increase the stock of good quality” structures. It also advocates promoting energy efficiency so as to make the buildings more desirable. Such renovation will “increase the value of real estate” in general by reducing running costs. The government also concluded that as a result of last year’s major earthquake people’s “thinking about real estate” has changed: they are now more aware of “land quality.”
None of the news reports we’ve read have indicated what the government will do, if anything, to follow up on the findings of the white paper. Tax breaks for people who fix up older properties? That might work but seems unlikely given the government’s current craze for tax increases. The construction industry will certainly welcome any renovation boom sparked by tax cuts but it isn’t going to be happy if such renovation comes at the expense of new building, which is where the money is. Increasing property values in that way has never really been in the government’s interest.
“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
Who died here?
Further on the subject of the property values of places where people died, which was started in the comments section of the previous post, there was actually a book titled “Tokyo Laundering” published last year about a fictional occupation: people who are hired by landlords or realtors to live for one month in houses or apartments where people just died. By having somebody occupy the place legally, the owner can rent or sell the property at its listed value rather than the cut-rate price that most owners are compelled to advertise for such a property since, according to law, they have to tell prospective buyers/renters that a person died there. If someone lives there for a month, they’re no longer obliged to reveal that information. It’s such a clever subterfuge, we’re surprised no one has actually put it into practice.
As far as we know, the only outfit that openly advertises such properties is UR, which lists rental apartments where people have died for something like half the normal price for up to two years. Supposedly, within their system 300 units become vacant each year because someone died. We’ve also heard of realtors soliciting doctors, people in the funeral business, and foreigners for such properties since such people usually aren’t grossed out by the idea of someone having died in the place they just moved into. There’s also a website that lists properties where “incidents” occurred, and though they detail the incident that took place (with the help of inadvertently humorous illustrations) and even show you the location on a map, you’ll need to do a bit of detective work to find out about renting or buying, since all they give as contact is the name of the realtor or owner. It’s a great site, however, for those into ghoulish walking tours.
And lastly, some insurance companies offer coverage to landlords for apartment deaths. If a tenant dies in one of their properties, they can receive up to ¥1 million, which should cover the money lost as a result of an extended vacancy or decreased rent.
Potential buyers inspect land for sale in Fujino, western Tokyo
Two weeks ago we were at the UR office in Yaesu helping some friends get around the application process and asked the employee about availability. Though there was no ulterior motive behind the question, the woman volunteered that a lot of residents in UR high-rises in the waterfront area were moving out after the earthquake. We were slightly taken aback: Only a semi-public organization like UR would admit to potential renters that people were anxious to leave their properties.
Upon further investigation, we found that the story is a bit more complicated, at least when it comes to buying and selling property. According to various news reports, there has been a notable increase in interest in the Musashino daichi, or plateau, which covers parts of Western Tokyo and Western Saitama Prefecture. This is considered stable land, meaning no risk of liquefaction. The waterfront, of course, is all built on landfill, but there are many other areas located inland that suffered soggy ground after the Mar. 11 earthquake, such as Abiko in Chiba and Kuki in Eastern Saitama, communities that were built on ground that used to be swampland, rice paddies, or even ponds. Usually, you can determine the kind of land an area once was by consulting an old map. If the old name contains words that indicated water, like numa (marsh), then you might want to make sure your foundation is built on piles. In fact, a lot of developers change the names of such places so that people think they were built on solid rock (almost any subdivision with the word oka–hill–is a dead giveaway). Read More
Room with a view, sort of
Last weekend we traveled up to Nikko to look at properties. Along the way, we could see the damage caused by the earthquake that hit southern Tochigi Prefecture the day before, mostly in the form of blue tarp hastily stretched across roofs where kawara tiles had broken loose. Kawara tends to be used in more traditional houses and is considered to have better weather-proofing and climate control properties than regular shingles. However, they are notoriously difficult to apply and easily come loose during earthquakes. Roofers throughout the Kanto and Tohoku regions are raking it in right now.
Nikko is one of Japan’s most historically significant places and a UNESCO World Heritage site. It was combined with several other neighboring towns and villages some years ago, and the area we visited is in the residential district to the south of the famous temples. In that regard, it isn’t significantly different from your average suburban residential area–meaning it’s cramped and nondescript–though the surrounding mountains and abundant pockets of wooded areas and terraced farmlands give it some character. The first place we visited, in fact, was in a development originally subdivided for besso (second homes). We got off at Tobu Shimo Goshiro station, which was small enough to not have a ticket wicket (we were on the honor system and only required to drop our tickets into an unattended box), and walked for 25 minutes through rolling hills and past the old cedar-lined Nikko Kaido to the subdivision, which didn’t really look like a subdivision when you approach it from the main road. Situated in a grove, it did look like a besso community, meaning the homes were varied in style, shape, and size. The property we were looking at was in the middle, next to a golf course, and the real estate agent from a Shinagawa-based company called Mount, who was going to show us all the properties, was already there getting the place ready for our inspection. Read More
Dark floor, dark room
Across and further down the Sumida River from our apartment is a large condominium complex that has intrigued us ever since we moved here. Legend has it that the late rocker Yutaka Ozaki had just moved into it when he was found not far away in an alleyway one night, dying. It’s a good legend, and like many legends it’s not true. At the time Ozaki was renting a much more commonplace sort of “mansion” in the same neighborhood. But it’s easy to understand why this particular complex has attracted that sort of speculation. Every so often somebody moves out and you see a flier in the mailbox advertising the unit, which tends to fetch a price comparable to new condos even though it was built in 1991. The layouts are more imaginative and seem more livable than those of most condos. Rather than cut a box into rectangles, the designers staggered the position of the rooms along corridors and shaped the building in such a way that every unit looks out on at least two views, meaning there’s more sunlight; or that’s the impression one gets looking at the layout and then at the building’s exterior.
Last week, we finally visited the complex after we saw a flier announcing that two adjacent units on the 14th floor were on sale: a 67-square-meter 2LDK for ¥28 million and a 94-square-meter 3LDK for ¥38 million. Though both of these prices were out of our league we wanted to see what was really there, and were quite shocked at what we found. Read More