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.

CI Villa

Last weekend TBS ran a long report on resort condos on the Izu Peninsula, focusing mainly on the Atsukawa Onsen region. The hook for the piece was an advertisement for a ¥20,000 condo. That may not sound like much of a bargain, but we’re talking sale here, not rent. The reporter visited the CI Villa condo, which is only 20 years old and commands a beautiful view of the Pacific. He wasn’t allowed to inspect the unit being advertised but he was able to visit another one of comparable size (43 square meters) and age. In any event, while the sale price turned out to be the real thing there were strings attached. The buyer would also have to pay more than ¥3 million in unpaid management and repair fees that have accumulated during the years since the unit was abandoned by its owner and seized by the authorities. And then, of course, the new owner would have to start paying these fees at a rate of ¥30,000 a month.

As the reporter pointed out after learning all this, the condo is still a bargain. Not only does it come with a view, but the management fees entitle the owner to use the building’s elaborate spa facilities, swimming pools, and other amenities. He thought the place was a steal, but as he started talking to local residents and public officials he came to understand why no one was snatching up these low-priced properties (there were quite a few, and not just in CI Villa). He remembered the TV drama series, “Zeni no Hana,” that aired many years ago and which was set in this particular town. It was a huge hit and sparked a travel boom to Atsukawa and in turn a building craze. About half the residences in the region were built after 1975, with construction peaking during the late 80s bubble period. The average price of a condo in CI Villa when it was new ranged between ¥40 and ¥50 million.

Of course, the end of the bubble also ended all that. One local merchant estimated that the number of tourists who come to the town is about “one-hundredth” of what it was during the peak times. And as more and more businesses who relied on these tourists left, the town fell into disrepair. Many people, it seems, do come down with an eye to buy property, most of which is in good condition, but once they see the boarded up shops and derelict infrastructure they get discouraged. The mayor said that the year-round population has aged even more quickly than the national average, and that welfare costs have increased six-fold since 1990. Because the tax base is so small, the town can’t keep up appearances. It’s a vicious cycle. One solution would be to exploit the region’s hot springs to produce and sell geothermal power. The temperature of the onsen approaches 100 degrees, and since local inns only need 50 degrees, the town thinks it could transform those wasted 50 degrees into revenues. The problem is that inn owners, who constitute the biggest block of business interests, are basically wary of geothermal, mainly because they think, wrongly, that it will sap the long-term onsen capabilities. One told the reporter that he had doubts about the local government’s belief that tourists would flock to the area out of curiosity and a desire to support such an environmentally effective project. Apparently, other onsen regions have had some success with such an endeavor.

And while knowing will not necessarily change someone’s mind about buying a place, it’s something they will eventually have to address. The fact that most people don’t think about it until the bill comes led us to wonder how reliable property assessments are. As we came to discover, the criteria and calculations used to determine the value of a property for tax purposes are too complex for a lay person to understand, which perhaps explains why the authorities don’t bother explaining them: property values are not listed on the tax bills. Then, last summer, we saw a report on commercial property tax problems on one of TBS’s newsmagazine shows. The gist of the report matched our own ponderings very closely: payers don’t understand how their taxes are determined, so they have no way of knowing whether the assessment has been done properly. The reporter asked people on the street about their own property taxes and the answers boiled down to, “The bill came and I paid it.” When we did our own informal survey of friends and acquaintances who own their own homes, the answers were the same. TBS learned that there have been many instances, nationwide, of commercial property owners becoming suspicious of high tax bills and hiring outside experts to carry out assessments, and then finding out that they’d been overcharged for years. One man in Nagoya, who owns refrigerated storage facilities, discovered that he had been paying up to ¥2 million a year more in property taxes than he should have. He sued and ended up getting a refund of ¥50 million. Apparently, when the local government originally assessed his facilities they neglected to take into account the fact that his warehouses are refrigerated, which means they depreciate faster than “regular” warehouses. He had essentially been paying the same rate since the beginning. At first, the city said it would only compensate him for five years, since there was a kind of statue of limitations on compensation, so he sued. In another case, a country club in Gunma Prefecture also hired an outside expert and discovered that the city assessors, who are obliged to carry out evaluations annually, had regularly overvalued fixtures and features, some by as much as 55 times. When challenged by the country club, the city said they couldn’t find many of the older related documents and that some of the assessors had “retired.” The expert hired by the country club said that most city assessors are not really qualified to make evaluations. They are usually civil servants who are in such a position for only a few year before being rotated out to other departments. The tendency is for them to overvalue rather than undervalue since they have to answer to their supervisors, not the property owners who, it’s assumed, know even less about the arcane evaluation process and will never ask about it. But this one did, and now the local government is being investigated for purposely overvaluing the property in order to get more revenue.

TBS only talked about commercial properties. Residential property assessments seem to be less problematic, but who knows? Since no one understands the process and most homeowners start from the position that there’s nothing you can do about it, they don’t challenge those assessments. Business owners who are paying millions of yen a year for property taxes can afford to hire expensive consultants to check their tax assessments, but residential property owners can’t, and if they’re only paying ¥100,000, they probably don’t think it’s necessary.

Another aspect of property taxes that we didn’t go into is that local governments, and even the central government, manipulate them in order to carry out stimulus programs. Right now, in fact, the central government allows for up to a 50 percent cut in property taxes for people who buy new homes that fit certain criteria having to do with energy savings. We didn’t mention it in the article because the tax cut expires in March, which means you would have to close on a house before then to take advantage of it. But it might be extended. Clearly, the purpose of the scheme is to sell more new houses (previously owned homes, even those with nominally “eco” features don’t qualify) and thus prop up the construction industry. Local governments also offer reductions on property taxes, either to help builders in the area or to encourage population growth and thus boost the tax base in the long run. The whole nuclear power controversy is tied inextricably to local tax policies. Local governments will encourage utilities to build nukes in their districts, even if residents don’t want them, with initial tax relief but in the long run they will still make more money than if the land was not developed. The sticking point here is that depreciation means that nuke plants pay less taxes the older they get, and so local governments then encourage improvements or even more plants (it’s why the Kashiwazaki-Kariwa plant in Niigata is the biggest in the world). They can collect more taxes from the operators. It’s not just a question of jobs.

And we haven’t even gotten into the issues of inheritance taxes and cadastral surveys, all of which are intrinsically linked to property evaluations. That’ll be for another post.

It was a classic eviction tale, and Hayakawa clearly sided with the tenants. As advocacy journalism goes, “Sayonara UR” has its good points. Throughout the doc, she refers to UR as representing “social housing,” something she believes is essential to the well-being of a well-ordered and responsible society. UR, as noted thoroughly in our blog, is semi-public, which means their obligations as a public housing provider are limited, and Hayakawa is careful about this point. She shows how UR still uses a lot of tax money in its operations, and interviews an outspoken professor who describes how UR is a money sink, more than ¥1 trillion in the red. The government has been trying to find ways of setting the company free. One of the main reasons they can’t, as evidenced by this documentary, is that people who rent UR apartments, especially those who have lived there a long time, don’t want the company to be made 100 percent private. There are many reasons for this, including the fact that UR does not follow the extortionary practices private landlords are known for, such as charging extra fees–gift money and contract renewal fees–that have no purpose. Hayakawa doesn’t address these reasons or the lack of laws that would protect tenants, but she does an excellent job of interviewing all sides of the story and giving equal weight to each. However, viewers not familiar with Japan’s housing situation may mistakenly equate social housing with low-income housing, which it is not. It’s a difference Hayakawa neglects to clarify, and because she doesn’t specify how much rent these people pay some will think they are poor, when actually they are quite middle class. In fact, given their economic status and the superannuated state of their abodes (most public apartments built in the 1970s for families are less than 60 square meters), many viewers may wonder why these holdouts aren’t jumping at the chance to move to newer, cleaner apartments that will cost proportionately about the same. She also doesn’t clarify that only ten of the 250 households asked to leave refused to do so by June of 2010, when the topic was covered by TBS. By April of the next year, the number was down to 7.

This is not to say that UR was completely above-board. Hayakawa does a fine job of explaining the “ants to honey” mechanism behind government and semi-government projects, and how another reason the government can’t unload UR is that too many public servants have a stake in it. One architect she talked to said that the work could be done for half that estimate if all the various vultures were cut out. In any case, the whole quake-reinforcement strategy is clearly a sham, but the fact that it is doesn’t necessarily mean the building is a good place to live. Hayakawa gets a great money shot when, after being refused interviews repeatedly by UR’s PR department, she ambushes the president of UR as he’s walking to his car after work. He dismisses her dogged questions with patronizing answers, so you know he’s not being straightforward.

And he probably isn’t. Actually, what’s most distressing about the Bldg. 73 case, which has gone to court, is that if a judge finds that UR has the right to evict the remaining tenants because of the quake-proofing situation, it will set a precedent that could allow any landlord in Japan to evict tenants for similar reasons. That is the real issue. More importantly, the whole problem of affordable housing in Japan is perfectly crystallized in the circumstances of UR, but because Hayakawa is looking at an adversarial story she doesn’t explain this larger picture, which involves a government policy that no longer has any use for public housing, not to mention a housing environment in which renters and buyers settle for second-rate quality. It’s easy to sympathize with the residents who are interviewed and who say they don’t want to move, that this is their home; but, objectively speaking, I wouldn’t live there if you paid me.

For upcoming screening schedule (in Japanese) see here.

Unlike the previous property we inspected in the coastal town of Onjuku, Chiba Prefecture, this one was firmly embedded in a subdivision, albeit a sparsely occupied subdivision. Slammed up against a dense forest, the sad-looking little gray house had no southern exposure to speak of, and so was situated perpendicularly to the road, offering the vacant lots to the west and east its only views. The fact that the house is 14 years old and nobody has snatched up these lots in the meantime probably means they never will, what with other, more elaborate and better planned subdivisions going up elsewhere in the town–and closer to the station.

We couldn’t imagine anyone buying this house, which, aside from being dark, was mold-infested and falling apart. Given the low price, one might think it could be fixed up, but up close the structure, at least, seemed hopeless. The design was out of whack: The toilet on the west side? The agent was polite and helpful but obviously understood the property’s unsellability and didn’t even bother taking our data the way he’s supposed to. There would be no follow-up. We all agreed, however, that it was nice to see somebody install double-glazed windows.

Situated on the edge of a huge rice field, the land that comes with this property is probably its most attractive feature, providing a sizable front yard, which the previous residents tried to make into a combination vegetable/Japanese garden. Considering how overgrown and tacky it’s become–not to mention the fact that the original asking price was ¥11 million–no one has obviously lived there for a while. The agent told us that the house was originally connected to its almost identical neighbor to the west. At some point the corridor that bound them was torn down, leaving a mysterious windowless storeroom off the bathroom as its only evidence of prior existence.

The layout was reasonable: two Japanese rooms situated in staggered parallel, both looking south; an open living/dining area perpendicularly positioned to the kitchen, which is large and airy. Despite the efficient use of space the rooms are darker than we like, owning mainly to the low ceilings and small windows. Also, a small wooden deck was built outside of the double sliding doors on the east side of the living room, facing the farmhouse next door, which is uncomfortably close. The agent said that someone still lives there though we couldn’t see any signs of recent life. It was the model of a derelict fire trap and would make any venture out on to the deck for purposes of enjoying the sunrise or whatever depressing.

Verdict: House would need at least 3 million more to make is livable, and the land size alone, not to mention the distance from transportation, couldn’t justify the price.

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.

According to Inzai city records, the average price of a single-family home in this particular area of the city is ¥24 million. This house is now on sale for ¥15 million. It has been on sale for more than three months, which is why we went to see what it looked like. With the conditions we mentioned above, this should be a steal, but for some reason no one seems to want it. Of course, normally in Japan, a house that’s older than 20 years, unless it’s in the middle of a major city, has no value. This one isn’t that old, and though it’s hardly impressive in terms of design or style, it still seems to be in good shape. Moreover, the land, which is on a major thoroughfare, should be worth quite a bit (if Inzai’s assessment protocols can be considered accurate).

But even if the property’s continued vacancy seems a mystery, it’s not a place that we ourselves would ever want to own, and maybe that feeling, more than the logic of the economics, says something.

Nowadays, any address with the name Fujimi attached is highly valued–if, in fact, it still affords a view of the sacred mountain. Tokyo, in particular, is so built up that, according to Tokyo Shimbun, there are only three locations left in the city named Fujimi from which Mt. Fuji can still be seen from the ground. The most famous of these is in Nishi Nippori, a place called Fujimi-zaka, or Fujimi Slope. In early November and late January, photographers and tourists converge at the top of the slope to wonder at the Fuji Diamond, when the sun happens to set behind the mountain’s summit. This year, rubberneckers almost lost their chance, since the weather was cloudy for two of the three days when the diamond view is possible. As it happens, it may be the last time.

That’s because Sumitomo is building three tower condominiums that will forever block the view of Mt. Fuji from the vantage point of Fujimi-zaka. This almost happened before. Back in 1999, another developer announced a plan to build a tall condo within the neighborhood that threatened the view, and local residents formed a committee to protest construction. Naturally, the developer paid no attention, but as it turned out, the building only blocked a small portion of the foot of the mountain. The new Sumitomo project will definitely block the whole thing, so the committee has asked the mayor of Arakawa Ward to lodge a formal complaint with the developer, which reportedly was quite “annoyed” by the request owing to the fact that the buildings under construction happen to be in Okubo, all the way on the other side of the Yamanote Line. Sumitomo bought the land five years ago and says it has complied with all relevant prefectural and ward regulations in planning the housing project, and the ward in question isn’t Arakawa, it’s Shinjuku.