Friday, Dec 07, 2018

Other side of the coin

Evening Standard: Japan gives away vacant homes in bid to tackle country's unique housing crisis

It is almost as if, the value of property is set entirely by availability.

Posted by stillthinking @ 12:33 AM (828 views)
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18 Comments

1. tenyearstogetmymoneyback said...

And a related post from yesterday. https://www.bbc.co.uk/news/world-asia-46492216 . We went to Japan on holiday in 2006 and one of our tour guides about the predictions of a dramatic drop in the population as the years progressed. Until recently they thought the answer was robots.

Saturday, December 8, 2018 08:23AM Report Comment
 

2. tenyearstogetmymoneyback said...

I just noticed your comment and my typo (tour guide told us).

It is almost as if prices are determined by supply and demand.

Actually you don't have to go very far from the South to find the same thing in the UK.

https://www.telegraph.co.uk/property/house-prices/stoke-on-trent-council-selling-homes-1/

This reminded me of an article a few months ago about some non working couple who couldn't renew their interest only mortgage and were claiming that with only £80K in their property they would be left homeless and destitute.

Saturday, December 8, 2018 08:33AM Report Comment
 

3. stillthinking said...

It does make you wonder about UK wealth valuations.

https://www.savills.co.uk/insight-and-opinion/savills-news/226807-0/uk-housing-wealth-tops-%C2%A37-trillion-mark-for-first-time-ever

The UK housing "wealth" tops 7 trillion, but poor old Japan, that has too many actually in existence already built houses, can't even give them away.

Monday, December 10, 2018 04:53AM Report Comment
 

4. nickb said...

Availability / supply and demand... It seems to fit these rural cases but property (ie residential land) prices in Tokyo have plummeted since the mid-80s. http://japanpropertycentral.com/2018/08/japan-property-price-index-for-april-2018/. They were worth 3.5 times their current value in about 1986. I doubt this has anything to do with availability / supply and demand for property, except in so far as demand is constrained by the availability of bank credit.

Monday, December 10, 2018 03:09PM Report Comment
 

5. stillthinking said...

There are no constraints of credit in Japan. I am there now. You know the 15,000 separated kids under Theresa May legislation. I am in that situation but I missed the kid, and have already done one year apart for UK visa requirements so came back out.
If you can fog a mirror in Japan you can buy a house and the mortgage rates are close to b*gger all. If you buy something on a credit card, the vendor will put half the amount in, then another three months later, put the final amount. Thats vendor lending plus credit card lending!
Nobody wants to buy property here. Nobody. The valuations never do anything apart from go down, you are guaranteed a loss. The Japanese do save, and obsessively so by UK standards, but never using property as a vehicle. That said, the situation is kind of similar to the UK in that Tokyo and the major cities are in a different world compared to how the average non-city dweller lives, same as London vs the UK.

Monday, December 10, 2018 11:45PM Report Comment
 

6. taffee said...

Japan credit bubble burst is still the only real example of what happens when a credit bubble bursts

Its why governments used to avoid it like the plague

It seems that once the decline begins it can't be reversed and deflation begins and takes hold in the mindset of the people

Tuesday, December 11, 2018 05:40AM Report Comment
 

7. tenyearstogetmymoneyback said...

Do the Japanese have the same attitude to houses as the Chinese, which is like cars, and it is obvious that a second hand one should be worth less than a brand new one ?
Years ago I saw some documentary filmed in China where they were walking around a new development and hardly anyone had moved in because the purchasers didn't want to devalue their properties.

Regarding Taffee's comment about declines and mindsets I recall it was like that in the UK in about 1996. Then "New Labour" took over and everyone decided it was time to buy.

Tuesday, December 11, 2018 06:28AM Report Comment
 

8. judgandury said...

Japan's population has been falling for almost 8 years. It is forecast to fall by another 30 million people by 2040. They have more houses than they need and the surplus is obviously set to grow. In fact there are currently 9.6 million more houses than there are households. Supply and demand.

Tuesday, December 11, 2018 10:29AM Report Comment
 

9. stillthinking said...

The Japanese buy the house, knock it down, and build a new one on the plot. Construction is usually fairly rapid by UK standards, it happens a lot so you see the constuction fairly often. Usually less than 3 weeks probably there is more faffing about behind the scenes. I think there are no planning restrictions i.e. the view of existing property owners has no bearing on what you do. There is also an element of superstition, if somebody died in the house, then that house is going down for sure, nobody wants to live there.

New builds in the UK have a bad reputation. I think personally that the modular housing units such as passive house which is designed to be cool in summer and warm in winter, are better than the existing stock of UK property. Its a bit weird to see how obsessively the UK hangs on to buildings which have low ceilings, not designed for indoor bathrooms etc

You also see a lot of wrecked housing, the roof has stove in. There is property tax which I think is considerably more than UK equivalent. There is also way more high density housing. Endless rows of Stalin type blocks. Pretty much anywhere in Japan you can rent for 300 GBP a month. I have often thought, there is no way that we can ever compete with the Japanese because our housing costs, which are either paid by the worker or the state, are at about the same level as many Japanese wages.

For some reason, Japanese don't have many windows. After a while this starts to get to you. If you work, no windows. In a bar or restaurant, no windows.

Wednesday, December 12, 2018 12:52AM Report Comment
 

10. nickb said...

stillthinking
If there is easy money now, that is long after after the credit bubble burst. Why else did prices fall? Were the economy to pick up again you'd expect this growth to wash into asset prices given the easy availability of credit.

Thursday, December 13, 2018 12:03PM Report Comment
 

11. tenyearstogetmymoneyback said...

Thanks for replying StillThinking. I have been to Japan once and went on the train from Tokyo to Kyoto. If there was any kind of Green Belt I didn't notice it, with suburbs along the entire route.

Regarding knocking down houses and building new ones does happen quite a bit on the South Coast. The estate agent who sold me my bungalow in 2011 descibed it as a £70K property on a £140K plot so that gives an idea why. What is even more common is to take the entire roof off and turn the place into a Chalet. There are some roads near here where about half the bungalows have had that done.

Friday, December 14, 2018 07:39AM Report Comment
 

12. judgandury said...

Over confidence in the post war "economic miracle" was the more general cause of the Japanese asset price bubble (it wasn't and still isn't called a credit bubble). As stillthinking points out there is currently plentiful credit at cheap rates in Japan and house prices still fall.

To emphasis this point further, let's look at Tokyo which is very different to greater Japan.

The population of Tokyo keeps growing.
The GDP of Tokyo is growing.
There is plentiful, cheap credit in Tokyo

If we are to believe the credit wallahs, rents and property prices should definitely be rising in Tokyo but they are not. Rents in Tokyo have been stable for a long time and are cheap by major world city standards. This is despite plentiful cheap credit and a growing population. Why? Take a look at this article link below for an explanation. If you don't want to click on it, it is a 2018 American article eulogising Tokyo's forward thinking house building policies. It explains how Tokyo has been building 100,000 houses per year and therefore staying comfortably ahead of demand from their increasing population. Not only that but the sizes of these new builds are almost 30% larger than what went before. The article puts forward Tokyo as a progressive template for an adequate supply of quality housing, planning policy and stable pricing.

https://www.thenational.ae/business/property/want-affordable-housing-then-take-inspiration-from-tokyo-and-build-more-of-it-1.713304

Friday, December 14, 2018 08:21AM Report Comment
 

13. judgandury said...

I'm sure no one wants too much detail but the above described Tokyo housing situation is no accident.

During the 80s house price bubble, prominent Japanese economists complained vociferously about Tokyo's planning and zoning policies which severely constrained supply thus exacerbating and facilitating the bubble. When bad loans to office block developers caused financial stress in the 90s, the government relaxed Tokyo zoning laws allowing surplus offices to be converted into housing. They then passed the Urban Renaissance Law which made rezoning even easier. The central government then passed laws making it it very easy to demolish and rebuild higher and took away almost all planning power from local government thus eliminating Nimby-ism. Further laws were passed that facilitate the building of larger, higher quality housing units that are earth quake proof thus steadily increasing the quality of the housing stock (some of it is still shanty-like) but unlike in most word cities there is almost nothing to stop people knocking down the old crap and building something better.

Friday, December 14, 2018 09:07AM Report Comment
 

14. mombers said...

Also of note is that Japan's wage growth has been in the doldrums for decades. Can't exactly ramp up rents to crowd out all other spending...

Friday, December 14, 2018 09:49AM Report Comment
 

15. nickb said...

@12, 13
asset price bubble, yes. It could not have happened without credit expansion though i.e. loans of sufficient value to maintain and increase those prices. Is this not obvious? The factors you mention in the 90s occur after prices had started to nosedive. So now there is easy credit, but nobody would lend you the sums they would have lent on a property in the late 1980s, and loans will still be tied to prospective values.

Friday, December 14, 2018 10:12AM Report Comment
 

16. judgandury said...

I'll have to write to the award winning Japanese economists and officials who have been widely lauded for their policies telling them that they are unfairly taking praise for creating a plentiful supply of housing and stable pricing in Tokyo. I'm sure they'll understand when I tell them that a couple blokes on HPC say its nothing to do with them cos its all down to credit innit.

Friday, December 14, 2018 12:40PM Report Comment
 

17. nickb said...

@16 I don't detect a substantive point here, but which award winning Japanese economists and officials? a figment of your imagination Flashman(?) pot kettle black innit?

Friday, December 14, 2018 02:55PM Report Comment
 

18. judgandury said...

Anyway, the information provided @ 12 and 13 was for the sensible of you out there. A bit late in the year but that's my yearly post done. Have a good Xmas everyone.

Friday, December 14, 2018 03:56PM Report Comment
 

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