Archive for the ‘Housing & Real Estate’ Category

Reality check: Condo repair funds not enough

Tuesday, May 3rd, 2011

Repair work on the exterior of a condominium in Urayasu, Chiba Prefecture

In mid-April, the land ministry announced the results of a study it had carried out with regards to condominium shuzenhi tsumitate-kin (reserve funds for repair costs). The ministry had never researched the matter before and found that throughout Japan money collected from condo owners by housing management companies for repairs is grossly insufficient, and called on developers to be more honest with potential buyers of new condos by outlining the true cost of potential repairs and setting fees accordingly.

When you buy a condo in Japan you take on the burden of certain running costs related to maintaining the building as a whole. This fee, called kanrihi, goes toward things like elevator maintenance and custodial staff. It can run anywhere from several thousand yen a month to almost ¥40,000 a month, depending on the building’s size, location, and amenities. However, there is another burden that owners must assume. Shuzenhi is money that goes into a savings account for future work on the building as a whole, such as exterior painting, structural repairs and replacing superannuated equipment. The land ministry found that in the majority of the 84 cases it studied the reserve fund was not enough to cover this anticipated work. The reason for this insufficiency is that developers set the monthly contribution way too low in order to sell units more easily. Because kanrihi is basically set by management companies contracted to take care of the building, the developers have little control over it. First-time homeowners may be discouraged to find that, in addition to their monthly mortgage payments, they have to cover these non-negotiable charges. Consequently, developers and realtors try to keep the shuzenhi low — ¥10,000 a month seems to be the psychological upper limit. The land ministry, however, is recommending that shuzenhi be doubled in most cases, a suggestion that, if carried out, could put a damper on the already beleaguered new condominium market.

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Let them rent mansions: Compensation for disaster victims will barely make a difference

Friday, April 29th, 2011

Cleaning up after the March 11 tsunami in Sendai (Satoko Kawasaki photo/The Japan Times)

For seven weeks now people from all over the world have been donating money to various charities to help the victims of the March 11 earthquake and tsunami. According to NHK’s morning consumer affairs show, “Asaichi,” as of April 25 ¥1.7 billion had been collected by Japan Red Cross and other charity organizations. After going through four stages of bureaucratic processing the money was supposed to start reaching victims on April 27. In the first wave of payments, affected households would receive ¥350,000 for each family member who died or is declared missing. If the family completely lost its home in the disaster, it would receive an additional ¥350,000. If the home was partially destroyed, the amount would be ¥180,000. Families who have been evacuated from the area surrounding the Fukushima No. 1 nuclear reactor receive ¥350,000.

That cash will certainly help, but as explained in an earlier post the burden of rebuilding shattered lives mainly falls on the central government, which will only compensate homeowners and businesses by so much. And as explained in another post, earthquake insurance, like supplemental medical insurance, is not designed to cover entire losses. Basically, benefits provide a little extra money, something to live off of while a homeowner or business owner decides whether or not he wants to go through the grueling process of starting over from scratch, which means borrowing money. NHK interviewed a Sendai family whose 4-year-old home was spared from the tsunami but nevertheless condemned by the local government because the landfill under it had subsided to the point where the foundation was at risk. They still owe more than ¥20 million on their 30-year mortgage and though they have earthquake insurance the benefits will cover, at most, only half the balance; which means they have to come up with the other half of the loan themselves. Then, presumably, they have to take out a new loan if they want to buy a new house. According to one financial planner on the show, they’d be better off renting, “but, of course there are financial disadvantages to renting,” she added. Obviously, in this case, there are even bigger disadvantages in owning.

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Summer electricity shortage countermeasure: Make your own

Tuesday, April 19th, 2011

Money on the roof

Last Friday night Tokyo Electric Power Co. announced, just in time for the nightly news, that it would be able to provide up to 52 million kW by the end of July. At present, the company can provide a maximum of about 42 million kW. Usually during the hottest days of summer they need 55 million, and if this year’s weather is anything like last summer’s, they could need 60 million.

So if Tepco’s assurance is sincere, there should be no problem with supply for the near future. The government has asked households to reduce their energy consumption by 10 to 15 percent, and consumers have already started getting into the habit of saving electricity. Still, if the crisis has taught us anything, it’s that we can’t proceed under the current system of energy supply. Changes need to be carried out on a national scale, but before that happens individuals with means will certainly look to assure their own electricity needs by themselves, and some manufacturers are only too happy to help.

In terms of cheap, makeshift solutions, one can always buy a portable generator with an AC outlet. Honda makes one for the agricultural market called Enepo at a list price of ¥10,470. It runs on two cassettes of liquid propane gas, the kind you use to run those portable gas ranges, and can produce 900kW for two hours. The main catch is that you’re supposed to keep it outside, but that shouldn’t be a problem in the summer. A representative of Honda told TBS that even since the earthquake orders for the generator have increased tenfold. Also, the retailer Yamada Denki is working with a company called West Holdings to make a large rechargeable lithium battery for home use. The battery can be recharged through a home outlet at night when electricity is plentiful, and then used during the daytime if the need arises.

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Earthquake insurance put to the test

Tuesday, April 5th, 2011

Though property insurance for damage caused by earthquakes is available in earthquake-prone Japan, there is, technically speaking, no such thing as earthquake insurance. Thanks to a deal struck by the national government and private insurers in the 1960s, individual homeowners who take out fire insurance policies can add a rider for earthquakes (which also includes tsunami and volcanos). Claims are paid out of a large fund that is maintained by the two partners, and according to the Nihon Keizai Shimbun this fund currently contains ¥2.3 trillion. The insurance industry projects that there will be about 500,000 claims filed for property damage, amounting to ¥1 trillion in payouts.

Damage assessed; next step, compensation (Yoshiaki Miura photo/The Japan Times)

So there’s enough money in the fund to cover at least private individual claims. However, when you look at the policies in detail these payouts will not be enough to recoup much of what was lost in the disaster. Available fire insurance policies(kasai hoken) for private homes cover up to ¥50 million if the entire home is destroyed (zenkai), and people can insure other property, such as furniture, for up to ¥10 million. However, earthquake insurance only covers 30 to 50 percent of what fire insurance covers. So if the coverage of your fire insurance policy is ¥10 million, you only receive from ¥3 million to ¥5 million when the home is destroyed in an earthquake. Moreover, damage insurance only covers the value of the home at the time of the accident or disaster, so if the value has decreased over time, you will only receive payments based on that lesser value. And fire insurance by itself usually does not cover a fire caused by an earthquake. You need coverage for both.

It’s assumed that the average payout in the Great Eastern Japan Earthquake for homes with coverage will be between ¥2 million and ¥3 million. The average damage insurance payout for the Great Hanshin Earthquake was a bit over ¥1 million per home. Altogether 65,000 claims were made for a total of ¥78 billion. At that time, only 9 percent of homes nationwide carried earthquake insurance, and only 3 percent of homes in Kobe did. Since then, the national portion has increased to 23 percent. In 2009 alone, 46.5 percent of homeowners who took out fire insurance added earthquake coverage. Not surprisingly, sales vary widely from one region to another based on frequency of temblors. In geologically active Aichi, Tokyo and Miyagi, as much as 30 percent of homeowners have earthquake insurance. The portion drops down to 15 percent in Gunma and Nagano prefectures.

One bright spot is that the utter destruction of the disaster may actually speed up the claims process. After the Hanshin earthquake the process took a long time because insurance companies had to assess the damage to properties in order to decide if they were “totally destroyed” (zenkai), “half destroyed” (hankai), or “partially damaged” (ichibuson). These are the only three categories for payouts and determine the amount of the payout. Because of the utter destructive power of the tsunami that destroyed much of the coastline of the affected area, the General Insurance Association of Japan, which represents all damage insurance companies, is assessing properties in a joint manner from the air, where it becomes apparent that all homes in a given area are zenkai. There is no need to check each property on the ground. In addition, policy-holders will not be required to bring in their policies to make claims, since so many lost documents in the tsunami. All they need to provide is identification. Even if a claimant forgets which company his policy is with, the association will find out.

Still, some policy holders could be in for a shock when they read the fine print. For instance, homeowners in Urayasu, Chiba Prefecture and other localities where houses were damaged by liquefaction may discover that their earthquake policies don’t cover that particular eventuality. But the Life Insurance Association of Japan has risen to the occasion. Most general life insurance policies don’t cover deaths from earthquake, but the association has said that its member companies will make an exception for the current disaster.

Tales of reconstruction: How do you assess damage of this magnitude?

Monday, March 28th, 2011

Last week, the central government said it would pick up the tab for almost all of the rebuilding in the coastal areas of northeastern Japan devastated by the earthquake and tsunami of March 11. This is obviously a big relief to local governments in the affected cities and towns, many of which saw entire infrastructures wiped out in a matter of minutes.

This property condemned: Building damaged in 2007 Ishikawa earthquake

The stickier problem is what to do about private property. Residents’ possessions, including homes, are spread out over vast expanses of no man’s land. To clean up the mess, laws regarding private property will have to be bent or even ignored. The government has already issued guidelines for the cleanup, even though it doesn’t necessarily have a clear understanding of the situation on the ground. But local governments are demanding something be done so that they can get to work. The governor of Miyagi Prefecture asked the Maritime Safety Agency to help it process all the boats and ships strewn over the blasted landscape. As of last weekend, the agency said it had processed 245 vessels but had only “returned” 13 to their owners. The rest were brought to a makeshift area that is causing problems since level land is desperately needed for temporary housing. But with harbors destroyed, there is no place to put the vessels while the agency identifies owners, who are then expected to dispose of them. With more than 6,000 people still listed as missing in Miyagi, something needs to be done quickly.

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Living off the land in Okinawa

Thursday, November 18th, 2010

Okinawa: Island of no return

Island of no return

One of the arguments in favor of keeping U.S. military bases on Okinawa is that many Okinawans make a living from the bases. If they were gone, these people would lose income. Among this group are people who own the land where some of the bases are located. The Japanese government pays rent to these people, who number about 3,000.

According to an article in the Asahi Shimbun, the total amount of money paid to these “landlords” in 2008 was ¥6.5 billion. That’s about 8 percent of all the rent paid to all 34,000 landlords on Okinawa. To put this in perspective, the American military controls about 20 percent of Okinawa’s land area (though it only occupies 11 percent), and rent on property accounts for 2 percent of Okinawa’s prefectural production (tourism accounts for about 10 percent). Moreover, only 8 percent of the landlords who get money from the bases receive more than ¥5 million a year. More than half the landlords receive less than a million yen, which means most landlords don’t make a living from the bases.

The upshot is that the U.S. military controls land that might be more economically viable if the residents of Okinawa controlled it. It’s very difficult to develop Okinawa for industry and commercial purposes, which is what many candidates for office in Okinawa want to do, because the position and size of the U.S.-controlled land make it impossible to build continuous transportation networks. Okinawa is the only Japanese prefecture with no rail service. Of course, Okinawa’s agricultural sector was greatly diminished by the U.S. military, which confiscated any land it wanted in 1945 (while detaining its owners indefinitely in camps) and then continued appropriating property as it pleased right up until 1972 when the island reverted to Japanese control. Compare this to the U.S. bases on Honshu. Ninety percent of that land was confiscated from the Japanese military during the American occupation. Sixty percent of the land used by U.S. bases on Okinawa is either private property or owned by local municipalities.

But that doesn’t mean there wouldn’t be enormous financial problems if the U.S. military left. It would require a lot of time and money to redevelop the land so that it could be used effectively for agriculture or industry, which means the Japanese government would probably have to pay for it because the island itself is so poor. It would be more than what they pay now to host the bases. So that’s another reason why the government isn’t so anxious to see the Americans leave.

Flood control: Destroying neighborhoods to save them

Sunday, October 24th, 2010

Money in the bank: Super teibo explanation along Arakawa River

Money in the bank: Super teibo explanation in Oshima Komatsugawa Park, Edogawa Ward, Tokyo

Next week, the most entertaining show in town, the deliberations of the Government Revitalization Unit, which holds hearings on government programs with the aim of cutting budegetary waste, will start again. According to various news reports, one of the main targets of the council this time will be the long-term public works project to improve flood control effectiveness in Tokyo and Osaka. Though Japanese rivers that pass through urban and suburban areas usually have extensive levee systems, some of which are centuries old, these embankments are thought to be no guarantee against the inundation of bordering communities in the event of a major storm. In 1986, a levee in Ibaraki Prefecture collapsed causing damage to surrounding neighborhoods, thus prompting the Liberal Democratic Party government at the time to initiate an ambitious public works project to shore up all the levees in the Tokyo and Osaka metropolitan areas, where many residences are actually situated below sea level. In the Kanto region, this project is being carried out for the Tone, Edo, Arakawa and Tama Rivers; while in Kansai construction is taking place on the Yodo and Yamate Rivers. Altogether,  872.4 km of waterways are targeted.

The method of reinforcement is to build “super teibo.” Teibo is the Japanese word for “levee” or “embankment.” Existing levees are essentially elevated banks that separate residences from the river. A super teibo would extend the elevation into the residential area, effectively raising the level of the area higher than the level of the river. In the event of a flood that rose above the level of the levee, not only would the levee hold, but the amount of water inundating inhabited areas would be greatly reduced.

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