Archive for the ‘Housing & Real Estate’ Category

Anticipation: How high will mortgage interest go?

Tuesday, May 7th, 2013

Of course, you can always pay cash

Of course, you can always pay cash

Just as deposit interest rates have remained near zero for the past 20 years in Japan, housing mortgage interest rates have been lower here than almost anywhere else in the world. The effect of the latter has been almost counter-intuitive. Low interest usually spurs investment in real estate and home sales but Japan’s economic situation, not to mention its housing environment, is so odd to begin with that this hasn’t proved to be the case. Younger people thinking about buying homes have lived with low interest rates for so long that they think it’s the norm.

Last week interest rates for housing loans increased by 0.05 percent, the first rise in three months. Interest rates for loans are based on 10-year-bond interest rates. The Bank of Japan, on behalf of the prime minister, is gunning for a two percent inflation rate, and in order to achieve that goal it announced plans to buy government bonds from banks. Anticipating the BOJ’s move, investors have started to sell their bonds. When the price of bonds goes down the interest they pay goes up. More people sold bonds than the BOJ projected, which may not make the government happy since in the long run it will have to pay that interest to bondholders. If consumer prices and, in turn, salaries go up, that won’t be a problem since the government can collect more taxes as a result, but if inflation doesn’t kick in then it just means even more government debt.

Consumers are more concerned with how the change in interest rates will affect them directly. A recent article in Aera profiled a working couple in their 30s who have decided to buy a condominium in Tokyo right away in anticipation of the consumption tax rise next year. Because they both want to be near their workplaces, they settled on an area where the price of a condo that fits their lifestyle is about ¥50 million. They only have ¥3 million for a down payment, and they chose a variable interest rate because it’s lower than a fixed rate right now. Aera asked a financial planner about their situation and the planner seemed dubious.

Continue reading rising interest rate →

Backsliding Japan Post broadens its horizons on all fronts

Tuesday, September 25th, 2012

While you’re out, drop by the post office to pick up some stamps . . . and a mortgage

On Oct. 1, two divisions of the Nihon Yusei Group, in English known as Japan Post Holdings, or JP, will consolidate. If you were never aware that four separate companies make up the post office service — Yubin Kyoku, Nihon Yubin Jigyo, Yucho Ginko and Kampo Seimei — then you shouldn’t feel embarrassed. The vast majority of Japanese don’t know about it either, so the merger of the two postal-related services, Yubin Kyoku, which manages the post office system, and Nihon Yubin Jigyo, which manages mail delivery, into one entity called Nihon Yubin may hardly qualify as news to most people.

In fact, most people will wonder what actually distinguishes these two entities. Aren’t the business of managing post offices and the business of delivering mail part and parcel of the same general enterprise? Apparently not, though you’d have to actually work in either of those companies to understand why. Perhaps the best way to explain this conundrum is to look at one of the new services that will be offered after the consolidation takes place, something called tsucho azukari.

With this service, a person who has a savings account at Yucho Ginko (Japan Post Bank) can entrust (azukari) his or her passbook (tsucho) to a regular delivery person, who brings it to the bank so that an employee can carry out a desired transaction on the person’s behalf. Logic would say this sounds like a cooperative service between Nihon Yubin Jigyo, the delivery arm of JP, and Yucho Ginko, the banking arm of JP, but all Yucho Ginko are located in JP post offices, which means it’s really a cooperative service betweeh Nihon Yubin and Yubin Kyoku.

Tsucho azukari is actually a traditional service, especially for the elderly in rural areas where it is sometimes difficult to make it to the post office. But in the past, it was an informal service, simply something that a delivery person did for someone on his route as a personal favor. The new service will be implemented initially on a trial basis at only 52 of JP’s 24,000 post offices. The service itself is less important than what it represents, a reversal of the postal decentralization that former Prime Minister Junichiro Koizumi made his life’s work and which started in 2007.

Continue reading about the birth of Nihon Yubin →

Buy now to beat the consumption tax increase … or don’t

Wednesday, September 5th, 2012

Diagram of new Tokyo condo with flowers marking the units that have been sold

Lookin’ rosy: Diagram of new Tokyo condo with flowers marking the units that have been sold

The term kakekomi kounyu means rushing to buy something at the last minute after hesitating for a long time. The implication is that there is some time limit involved. It’s being used a lot now in the media with reference to the consumption tax, which is scheduled to rise from 5 to 8 percent in April 2014, and then again to 10 percent in October 2015. It’s assumed that many consumers will try to buy big-ticket items before the increase goes into effect in order to save money, and that a good portion will wait until the last minute.

Some economists are advising people to not wait too long, especially if they’re thinking about buying a new home. Recent articles in both the Asahi Shimbun and the weekly magazine Shukan Post say pretty much the same thing on the subject: If you’re thinking about buying a home or a car, you should start planning right now. The Asahi uses the example of a ¥30 million condominium. You can figure that about a third of this is the price of the land, and since land sales are exempt from consumption tax it means you’ll pay tax on ¥20 million.

At present, the tax will come to ¥1 million, but after April 2014 it will go up to ¥1.6 million, and then 18 months later to ¥2 million. If you want to take advantage of this savings, experts say you should move now, because the tax is levied not when you sign the contract for the new home, but when occupancy of the property is “transferred over” (hikiwatashi) into your name, and in most cases the average time between the point when a particular unit goes on sale and the point when the buyer takes possession of it is one year.

So if you want to beat the consumption tax raise you have to start looking now. That’s why so many real estate flyers for new homes stress that “now is the chance.” They really do mean “now,” as in “today.” Moreover, realtors and developers are saying that since there will be a rush to beat the tax, demand will be high and so the longer you wait the less likely it will be that you can find what you want. Prices may even be higher the closer you get to April 2014.

Continue reading about making big purchases before the tax hike →

How high is up: Tokyo Skytree boosts economy for some

Thursday, May 31st, 2012

There’s a Japanese proverb that goes something like: Smoke and stupidity always rise to the highest places. It’s a useful saying when talking about the media frenzy regarding the Tokyo Skytree, which opened to the public May 22. Though it’s not our mission to ponder the psychology of why people like to go to the top of very tall structures and look down on everyone else, whatever the attraction, it hardly justifies the redundantly blanket media coverage of the new broadcast tower in Tokyo’s Sumida Ward. Of course, the Tobu Railway group, which owns and operates the tower, couldn’t have asked for better publicity. The number of visitors has so far exceeded its own estimates by 50 percent. No one has bothered to calculate the equivalent value in advertising that this free PR represents but it must

Skytree crowds on opening day (Satoko Kawasaki photo)

be in the billions of yen. And it’s paid off. As of last February, group reservations for tickets to the upper observation deck were booked until July 22, amounting to some 300,000 separate admissions. Because a number of people cancel on a daily basis, the operator of the 634-meter tower has decided to sell an additional 1,000 tickets a day to the lower observation deck (350 meters) between June 4 and July 10 at ¥2,500 a pop. The limit for daily admissions is 14,000, but after cancellations the number that have actually shown up is between 12,000 and 13,000. Altogether, 1.4 million
visitors have been in the tower, 85,000 of whom went to the upper observation deck (450 meters), which costs ¥3,500. Reservations must be made with a credit card (only those issued in Japan are acceptable), and there are no refunds. At those prices and those numbers, it should be no problem for Tobu to pay off its massive ¥400 billion construction cost in a matter or years rather than decades.

Tobu isn’t the only party counting on the Skytree to boost its financial situation. Tokyo Shimbun reports that the “economic impact” of the tower should also be felt nationwide to the tune of ¥174.6 billion and in the Tokyo metropolitan area by as much as ¥130 billion. Even more impressive, Sumida Ward expects ¥88 billion, and that’s just in income. Of the eight Tokyo districts where property values rose in 2011, two are in Sumida Ward near the Skytree. However, according to the Mainichi Shimbun there is some talk among Sumida residents of just how much they themselves will benefit in the balance. About 32 million people a year are projected to come to Tokyo Skytree Town and its retail complex Solamachi, which is considerable given that annual admissions to Tokyo Disneyland and Disney Sea total 25 million. But the surrounding area is more residential than commercial and while local merchants are trying to make the most of the tourist windfall, those who simply live there are wondering if the boost is worth all the trouble. How the influx compromises public safety

Money isn’t everything for renters…or is it?

Wednesday, March 7th, 2012

The real estate information magazine At Home has released the results of a survey it conducted in December among 600 people who are looking for rental apartments in Tokyo’s 23 wards. The main purpose of the survey is to find out how much people compromised when selecting an apartment, the idea being that, especially for young persons, there is no such thing as an ideal affordable apartment in Tokyo, so which criteria were respondents most willing to compromise on and which ones were they totally unwilling to compromise on? They were not allowed to say rental amount, size of apartment or surrounding environment, probably because everyone compromises on those three.

You can't get that here

The number one answer (30.3 percent) in terms of what they would compromise on was distance from the nearest train station, which tends to be the most reliable criterion in Tokyo for determining cost of a rental. The second most common answer was age of the apartment. However, when it came to criteria they wouldn’t compromise on — for this question respondents were allowed to give multiple answers — the number one answer, once again, was distance from station (72.2 percent), with separate bath and toilet and higher than second floor tied for second place. The third answer was age of apartment. When asked what upper limit they would settle for in terms of distance from the nearest train station, 39.1 percent said between ten and fifteen minutes and 31.8 percent said between five and ten minutes.

Nevertheless, the main criterion for compromise is always the price of rent. Among the single persons surveyed (average age 31; average salary ¥5 million) the average rent they were “looking for” was ¥89,000 a month, but for the apartment sizes they desired the average rent in realistic terms was calculated by At Home to be about ¥128,000. For married respondents (average age 33; average salary of householder ¥7.4 million) the difference between what they want to pay and what they would realistically pay was about the same, ¥39,000. That would seem to represent the perception gap regardless of income bracket.

At Home concluded that 40 percent of people looking for an apartment in Tokyo “have to compromise even before they start looking,” and when asked if they thought that life was all about compromise, 60 percent answered “yes.”

Higher electric bills on horizon to pay for solar

Friday, January 27th, 2012

The government’s plan to develop solar energy as an integral part of Japan’s electric power system is starting with power companies buying surplus energy from people who have installed solar collection systems in their homes. To promote solar energy, the companies are required to pay a certain price for the power, and they pass this added cost on to all their customers as a surcharge. On your bill it is designated as taiyoko sokushin fukakin (solar energy promotion supplement) and varies in amount depending on where you live. In regions where solar energy collectors are more prevalent, the surcharge will be larger, since the utilities in those areas pay more money for solar energy. As can be expected, sunnier regions tend to have more solar collectors.

Pittance: the surcharge for solar energy promotion on this December bill from Tepco is ¥6

Right now 3.3 percent of homes in Japan have solar systems, which means Japan has a long way to go before it reaches former Prime Minister Naoto Kan’s target of 10 million homes with solar systems, which would mean about 40 percent. In Kyushu, which tends to have more days of sunshine than other regions, the portion is 6.4 percent. In Hokkaido, it’s only 0.8 percent, which means the average surcharge for Kyushu residents is much higher than it is for Hokkaido residents.

Another factor that determines how widespread solar systems are in a given area is the amount of subsidies local governments offer to residents who install them. In 2010, Aichi Prefecture was No. 1, with 16,000 applications for subsidies, followed by Saitama and Tokyo. Home ownership rates in Aichi and Saitama are very high.

The Nihon Keizai Shimbun has reported that on Jan. 24 Japan’s 10 regional power companies announced that the surcharge would increase in 2012. Currently, the surcharge ranges from ¥2 to ¥21 per month. It will increase, depending on the place, by ¥3 to ¥24 per month. (For Tokyoites, it will average about ¥17 a month.) These 10 companies bought 2.15 billion kilowatt/hours worth of energy from home solar systems in 2011, which is equivalent to 30-40 percent of the output of a nuclear reactor during the course of a single year. For this, they paid ¥95.6 billion, a 53 percent increase over what they paid for solar energy in 2010.

In July, the power companies will start another phase of the energy scheme when they begin buying electricity from wind power generators and other renewable energy sources, though it isn’t clear right now what sort of surcharge will be added to energy bills as a result.

Annals of cheap: 5manika.com

Friday, December 2nd, 2011

Redecorate your one-room apartment in retro (read: cramped) style!

“Deflation” continues to be the word on everyone’s lips when they talk about Japan’s economic problems, but so far one area has resisted the price-reduction trend: apartment rents. That may be finally changing. According to a recent article in the Tokyo Shimbun, it is now possible to find a one-room apartment with bath and toilet in the 23 wards of Tokyo for less than ¥50,000 a month. Generally speaking, since the mid-’80s the only units in the center of the city that were less than ¥50,000 were those in old wooden apartment buildings with communal toilets and no bath, meaning you had to patronize the local sento (public bath). Tokyo Shimbun credits the rise of the Internet with the reduction in rent, since more real estate companies are publicizing properties on the net and, as a result, apartment-seekers have more of an opportunity to compare prices. Before the Internet, you had to basically visit every real estate office in the area where you wanted to live, which is a time-consuming endeavor.

One young entrepreneur, Kenji Yoshioka, is already profiting from the trend. A former employee for an investment fund who handled real estate, the 33-year-old set up a company called A Power Home last April and launched a website called Yachin Go-man-en Ika that advertises only apartments which are ¥50,000 a month or less. He was responding to the reality that younger full-time workers were less well off than their predecessors, who had bigger benefit packages, more assured salaries and, most importantly, the use of company housing. Young people wanted cheap apartments near their workplaces but didn’t want to give up basic amenities, like a private toilet and bath. Yoshioka decided to collect this information in one easy-to-navigate website. It was an immediate hit and in October he even set up his own real estate company.

In most cases, the cheap apartments that Yoshioka publicizes are “sleeping,” meaning that they’ve been vacant for some time. Normally when people go to realtors and specifically ask for apartments that are less than ¥50,000, the agents turn them away because the commission isn’t really worth the time and effort. Landlords, however, are desperate to rent such places and many have remodeled them to make them more attractive while keeping prices affordable, adding things like sound-proofing and even elevators. Many attempt to attract women tenants (who make up more than 50 percent of single apartment-seekers looking for cheaper units) by allowing pets. Tokyo Shimbun mentions a one-room apartment with a loft, kitchen, unit bath-with-toilet, and even a window only ten minutes walk from Itabashi Station that costs ¥48,000 a month. There are even some properties listed for as low as ¥30,000 that have baths and toilets.

According to the real estate research company Home’s, the average rent for a one-room apartment in Tokyo has decreased by 5.3 percent in the last year alone. In addition, security deposits on such units have decreased by 8 percent and gift money by 11 percent. Since the vacancy rate for apartments in general in Tokyo is more than 10 percent (undoubtedly higher for cheap one-rooms) it’s not likely that rents will go up in the near future.

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