Odakyu-sen

There has been a high correlation between immigration and house price inflation in New Zealand. The total population in New Zealand is around 4 million, and there have been, say, 100,000 Chinese immigrants arriving in the last couple of years (my figures are by no means accurate). This might not seem like a lot, but considering that the average net worth of a Kiwi in the 20-40 bracket is about $50,000, and the average Chinese immigrant (due to strict Ministry guideliness, has a net worth of (I am making this up), say $NZ500,000, then the impact on the market would as if a million Kiwis had arrived (in terms of purchasing power). The result: housing prices through the roof in Auckland. Lots of Kiwi retirees taking the cash and moving to small country towns, pushing up the price of housing there (re Nelson and Alexandria). The University of Auckland commerce courses are full of Chinese. What a cash cow for the University! Not nearly enough Japanese, though.... (And I get paid in yen. Damn the high NZ dollar..... (Ouch!))

Just a quick and nasty yield calculation on a Japanese apartment, say 1 km from a railway station some 30 km out of Tokyo. Cost of 2nd-hand (built after 1992) 2 bdrm, 65 sq meter apartment, say 40 million yen. Gross rental income, say 125,000 yen per month. 125,000 x 12 = 1.5 million per year (assuming 100% occupancy) 1.5 million / 40 million = 3.75% gross return on capital. (Still, banks are only paying about 0.5% interest on savings accounts...) Note that this doesn't take into account depreciation, insurance, etc. Plus, the apartment will only have a service life of about 30 years before a major refit is needed. (And you try to get all the members of the owners' cooperative to agree on the repair bills.) Capital gains tax, and fixed asset tax (kotei shisan-zei) is significant in Japan, plus inheritance tax can take a good 40% bite in some cases. AND Tokyo is due for a major earthquake any decade now.

If you've got your health (and your family's health), you've got just about everything.

I think the better Japanese manufacturers depend on foreign markets to buy their wares. If the U.S. and Europe buy fewer Japanese company products due to HPC, it could put further downward pressure on Japanese incomes. Japanese housing prices are still drifting downwards. The problem is that everyone in Japan knows this, so who wants to buy a detached house when the land under it is dropping in value by almost 4% per year. Okay, so a few prime commercial sites are up--but there aren't so many of them. The real problem for Japan is that the number of deaths is about to overtake the number of births. From about 2006-07 onwards, the Japanese population will begin to fall. The number of people aged 65+ will surge as the boomers pass through the demographic pyramid in the next decade. Their need for nursing care and desire to cash out their real estate holdings will put further downward pressure on residential real esate, especially in the provinces where there is little industry outside farming and light manufacturing. I think prices of 2nd and 3rd-grade properties will continue to stagnate for the next couple of decades until average house prices reach about 4.5x average annual household income. They are still about 7x at the moment. (These are really rough figures).

You've got that one right. To take a local Japanese example and compare two properties. The first is a detatched house about 1 km away from a railway station on the main trunk line into Tokyo (about 50 km to the capital). The second house is out on the fringe by the rice fields, about 6 km from the same local center and a half-hour's bus ride through the teeming rush-hour streets to get to the station. As the market slides, the price of the first house will sag a big. But there will be no interest at all in the second house. In other words, good-quality, useful real estate will maintain its value far better than 3rd-grade rubbish tacked up during the bubble to catch desperate souls wanting to get onto the "property ladder." The cheaper stuff will take a far greater pummelling, especially if the number of buyers falls.

I saw a news item on NHK (the Japanese version of the BBC). Now, I think that these are the posted land prices that the authorities use to calculate land taxes. The surges quoted may be based on actual market sales. If you though VIs were bad in the U.K., you ain't seen nothing like the vested interests in Japan. Prices are still falling overall. A few prime real estate examples, such as in the front of Nagoya Station and in the better parts of Tokyo, have showed a drop. But overall, the fall continues. In the regional cities, the fall is even worse. It's too early to say if this is part of an upward trend. Okay, so a few real estate jewels will go up, but the vast 99% of secondary and tertiary real estate will continue to slide. To make matters worse, Japan is facing a severe decline in population in the near future. The average birth rate is about 1.22 children per woman. I shall have a dig around on the Japanese newspaper sites like the Asahi (a good, left-wing rag) and see what pops up.

I fear the uncertainty, but the knowledge that if I do nothing I will ultimately hate myself for my cowadice gives me the incentive to retrain and prepare to launch myself into business.

Any nationalist really ought to go and live in a foreign country for a couple of years to the point where they can speak the language, read the newspapers, pay local taxes, pass the local driving test, tour off the beaten track, get a local lover... And then they can return to their land of birth and really appreciate it. To know yourself you must know others.

Having savings means I can go back to university in mid age and finish off that BCom degree I started 22 years ago. If I had a mortage around my neck, I would believe myself to be stuck on the treadmill and unable to retrain (re-skill). Having savings gives you a cushion to protect yourself while you engage in risky activities, such as changing careers, retraining, taking time to plan or start a business, etc. Some friends have only about 2 months of savings to live on should they lose their jobs. (And I don't know what level of debt they carry.)

Buy a small second-hand safe (size of small TV). Put it in your bedroom closet. Don't put anything of any great value in it. Stash the gold inside a hollow space somewhere in your house--say inside a wall, in a false bottom of something. The safe is a decoy.

Damn! I always go to my local market with a shopping list! Now you've got me worried!

Nine square meters! That's cruel and unusual punishment even by Tokyo standards. My wife and I lived in a 55 sq m apartment, and it was small. I think the smallest one-room-mansions I saw in Tokyo were about 19 square meters. Usually when these things start hitting the market in volume, it is time to bail out of the market big time.

Nihongo Lesson (Part 38) The new Japanese term "shoshika" "sho" = few / little "shi" = children "ka" = "...ization" My take on this term is that it means fewer children in society, i.e., a falling birthrate. I don't really think it means a society without children. Generally speaking, Japan is a great country for children (up until junior highschool level at age 12, at which time the hammer falls). Fundamentally, the "attitude" of society and government is very pro-child; on the other hand, whether the authorities will actually make it easier to have children (encouraging fathers to participate in child raising, reducing class sizes, providing meaningful tax breaks for families, providing relatively low-cost housing (3.5 x annual salary of single breadwinner), etc. is quite another matter. School class sizes are falling. In response, the Ministry of Education is shutting down schools and retaining the large class sizes of 36-40 primary school children per teacher. I could go on. And this is not to mention the rise in the power and independence of young, well-educated Japanese women. They are mentally very tough, and are giving the finger to the patronizing traditional male attitudes in Japanese culture. We are looking for quite crash in population over the next couple of decades. There is no possibility of non-ethnic immigration (Brazilians of Japanese descent are different, of course....) Looks like the robots will save the day. Doraemon will look after us!! (Google for this blue "cat" and read between the lines...) You don't know who Doraemon is? You will. Eventually.

MSN had a headline that read "Gold at a 17-year high." So, if the popular press is talking about it, then it settled: gold will be the next bubble. Just my 2 yens' worth.

Yes, I get paid in yen, so currency appreciation would be nice. The exchange rate at the moment is not good, at about 78 yen to the dollar, up from about 60 yen a couple of years ago. If land prices in Japan keep on falling, I might be able to buy a nice little house near the seaside in Shimoda (the port where Captain Perry made landfall in Japan in the 1860s) for my retirement. Although prices in the main centers will no doubt hold their value, the provinces are going to get hammered due to depopulation, the aging population and lack of employment. With 63% forest cover, Japan is a green country indeed. (Check out Google Earth). (Okay, so the coastal plains are wall-to-wall concrete--I'll admit that.) Japanese shares pay lousy dividends, but with the pace of reform gathering speed and a gradual changing of the guard in corporate Japan, things may improve. Japan has had 13 years to face reality and eat humble pie. A lot of weaknesses and inefficiencies in the system have been exposed and criticized. The old problems of the aging population and dependence on exports to drive the economy still remain. If Europe and the U.S. tip into a severe recession, Japan may be in a better position to recover first, having had more experience dealing with a burst bubble and the hangover of a consumer credit binge.

Ahhh. I see more red arrows. The crop is ripening.

Damn! People are going to have to work to make money! (What a shocker!!)

I guess the bank or lending institution (who holds the title) would force the sale of the property to recover costs. Occupants of properties are protected pretty well under Japanese law, and the courts move very slowly. Fundamentally, the legal system is similar to the U.S./French model. (No juries). Japan still has the death penalty, by the way (hanging). Happily, it is not applied to people who fall behind in their mortgage payments. Negative equity is a sore point with many who bought apartments during the bubble for 60 million yen, only to find that now they are worth about 45 million yen. Unlike in the U.K. used houses for sale in Japan do not have signs in front of them. It is a very hush-hush process. Open days are not publicized. It is all by apointment. Very quiet, you understand. On the other hand, when a brand new apartment block is opened, there are huge signs. Newly constructed houses are similarly signposted. The signs in front of bare lots on new subdivisions are the biggest of all.

BTW, Here's a cute little blog from Mari in Tokyo who makes some accurate observations about apartments in Tokyo. (It's in English) Check it out. http://smt.blogs.com/mari_diary/2005/08/the_price_of_la.html And now, for an experiment. Here is the URL of a Japanese real esate site. I don't know if your operating systems will support Japanese. The point is to click on the far left column of little icons. If it works out, you'll be able to see some photos of Japanese houses for sale. Let me know how you get on. If this works, I can try loading up some properties on sale in Tokyo. 交通 徒歩 バス 停歩 価格 間取り 建物面積（ｍ2） 土地面積（ｍ2） 私道負担面積（ｍ2） 構造・規模 物件種目 築年月 湘南モノレール 西鎌倉駅 5分 - - 6,260万円 ４ＬＤＫ 158.26ｍ2 237.96ｍ2 鉄骨 2階建 中古売戸建 1991年6月

To give gut-feeling answer: the failure of banks and other financial institutions, thought to be unsinkable. When the stock market started to flag in 1989, a collective thought of yabaiiiiii!!! surged through the country. Ominously, banks started to merge. In 1990, the Taiyo Kobe and Mitsui (or was it Mitsubishi?) banks tied the knot. The unchi really started to hit the senpuuki in 1991 with the first bank failure. The faces of the gnomes in the Ministry of Finance turned blue with shock. What to do? This had never happened before! Where was the instruction manual? The whole scene started to descend into farce, like a bad movie. By late 1992, land prices had started their retreat, which they are doing to this day.

Established houses (not rabbit hutches) on decent (by Japanese standards) plots of land can still be hideously expensive. Prices of 150 to 250 million yen for these kinds of houses (while adjacent rabbit hutches are 50 million yen) are typical. I will have to do some research, but prices would be analogous to London ones.

Sorry about the crushed table below. Table 4: Comparison of price trends among gold, rice, rent, wages and land (units: yen) Item Early Meiji Circa 1900 1920-22 Postwar(1945-49) 1955-57 1970-72 1990 2000 Gold (1 g) 0.67(1868) 1.34 1.73 4.8 (‘45)75 (‘47) 585 (’53) 690 2,008 1,140 Rice (10 kg) 0.55(1868) 1.12 3.04 6 (‘45)149.6 (’47) 845 1,600 3,741 3,641 Rent (per month) 0.08(1880) 0.75 10 50 (’45) 1,800 15,000 130,000? 110,000 Carpenter’sdaily wage 0.5(1868) 0.66 3.53 35 (‘45)130 (‘48) 720 3,500 12,690* 14,790 Commercial land (per tsubo) 5(1873) 300 1,000 150,000 (‘47)400,000 (‘49) 2.63 M 6 M 100M 40 M Source: Shukan Asahi ed., Nedan no Fuzokushi (The History of Prices), Asahi Shimbun-sha, 1987. Figures for 1990 and 2000 have been obtained via web search. Gold: the maximum sales price of the year after 1970. (Figures for 1990 and 2000 from http://gold.tanaka.co.jp/commodity/souba/y-gold.php). Rice: Price of standard-quality rice. (Figure for 1990 and 2000 from http://www.shizuoka.info.maff.go.jp/nousei/data/bekasyo.htm). Rent: Either a detached or semi-detached house with 3 rooms, kitchen and bath in Itabashi, Tokyo (floor area of 40-50 m2). Figures for 1990 and 2000 are estimates. Commercial land: 1 tsubo in Ginza, Tokyo’s central commercial district. Figures for 1990 and 2000 are estimates. (1 tsubo is about 3.3 sq meters) Daily wage of a skilled carpenter. (* Average of all construction workers for 1990). Figures for 1990 and 2000 from the Ministry of Welfare and Labor.

Hmm. I have some anecdotal evidence for late eighties for my suburb in the Tokyo Metropolitan Region. Year: Approx. 1991 Suburb: Fujisawa (located on the Sagami Bay, some 20 km SW of Yokohama) Commute to Tokyo: Approx 50 minutes on the Tokkaido railway line, 60 minutes on the Odakyu line. Typical detached newly 3-bdrm built house with a floor area of 110 sq meters sitting on a land area of about 100 sq meters, located in a new subdivision: 70-80 million yen. Average yearly salary: 5 million yen. Estimated deposit: 10-20% (The typical buyer would have been saving hard for about 10 years, and have a stay-at-home wife and a young family.) The usual term was 30 years at around 6% in those days. I can have a dig through the archives if anyone has specific questions about figures during the Japanese bubble, but it may take a few days. I guess that for many ordinary Japanese workers, the P/E ratio has always been pretty high around Tokyo. In the mid 80s as things started to rise, the ratio would have been about 10, rising to 20 at the height of the bubble. Prices how have fallen back to about 10, and interest rates are lower. Official unemployment lept from 2.5% during the bubble to about 5.2% at present. The bubble years in Tokyo were truly insane. At one time, sushi with gold leaf on top was a news item. I kid you not!

Can Life Mortgages be inherited? If so, they would become permanent mortgages. (I recall the "intergenerationl loans" of the Japanese bubble back in the late 1980s: 50-year loans to be paid off by your grandkids.) I feel another deja-vu moment coming on.....

I remember the "1-room mansion" boom in Tokyo in the late eighties. "Mansion" in Japanese means an apartment in a high-rise housing block. (Also answers to the name of "rabbit hutch.") Where was I? Oh yes. If I recall, scads of these horrible little things were hitting the market about a year before real estate really started to slide. Many only had a floor area of 19 square meters. They were so small inside that if you sneezed, your ears popped. When BTL one-rooms becomes hyped as "the thing to buy," you had better run; the bubble has already burst. At least that was the case in Tokyo circa 1990.