Sept. 18 (Bloomberg) -- Broken wood pieces dangle and sway like autumn leaves from the window frames of vacant homes in Inariyato, part of Yokosuka in the greater-Tokyo urban area, where taped-over mailbox slots tell a story of abandonment.
More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour’s train ride south of Tokyo and 1,000 yards (900 meters) from the Yokosuka naval base, home of the U.S. Seventh Fleet. That hasn’t stopped developers from building at least eight new apartment blocks in the same city in the past two years.
Prime Minister Shinzo Abe’s plan to boost the economy in part by reviving the housing market and encouraging new home construction is in conflict with Japan’s demographics. Rural, suburban and less-desirable urban areas are becoming littered with empty homes as younger people moving to cities combines with one of the world’s fastest-aging populations. At the same time, tax breaks on mortgages favoring new-home purchases, recently extended to 2017 and increased to 50 million yen from 30 million yen, are spurring demand for new properties.
“Even when the number of vacant homes is on the rise, more and more new homes are being built,” said Hidetaka Yoneyama, a senior researcher at Fujitsu Research Institute in Tokyo who has written at least five books on Japan’s housing market. “That’s absurd.”
Home vacancy in Japan, estimated at about 18 percent of housing nationwide, may reach 24 percent by 2028, he said.
Vacant homes have risen one percentage point every year from 13 percent of housing stock in 2008, before Abe’s stimulus policies, according to Yoneyama’s estimates. With 57 million homes in Japan as of 2008, the last time the government counted them, at least 570,000 homes without occupants are accumulating every year, he said. Housing starts have increased by 31,462 units a year over the past three years, according to the Ministry of Land, Infrastructure, Transport and Tourism.
Helped by Abe’s policies since he took office in December, housing starts rose for the 11th month in July, the longest streak since February 1994, land ministry data show.
The recently constructed units in Yokosuka and its prefecture, excluding Yokohama, cost 37.7 million yen ($377,000) on average, according to a report by developer Haseko Corp. A vacant two-story, traditional gated house in Inariyato with five bedrooms is listed on Suumo, a real estate search engine, for just 6 million yen. Surrounding houses are empty, too.
“Is it really OK to continue to build more and more new homes?” said Wataru Sakakibara, manager of the real estate group at Nomura Research Institute Ltd. “We can’t stop housing stimulus because it revitalizes the economy, but we must consider ways to resolve this issue.”
Abe’s policies have also helped boost revenue for real estate developers including Sekisui House Ltd., Japan’s second-biggest homebuilder. Sekisui on Sept. 5 revised earnings forecasts upward by 22 percent for this year on increased demand. Daiwa House Industry Co., Japan’s biggest homebuilder, said it expects earnings to reach a record 73 billion yen for the year ending next March 31.
Low mortgage rates are helping spur demand. A fixed-rate, 35-year loan for a new home in Japan is 1.9 percent, skirting April’s all-time low of 1.8 percent, according to the government-affiliated Japan Housing Finance Agency. That compares with 30-year mortgage rate of 4.57 percent in the U.S., Freddie Mac data show.
A Japanese government plan to increase the sales tax next year, including on housing, to 8 percent from 5 percent, has also boosted demand. Developers are seeking to profit by putting more apartments up for sale as buyers rush to acquire them before the increase comes into effect. The number of condominiums for sale in Tokyo and surrounding areas rose 53 percent to 4,145 units in August, the biggest same-month increase since 1996, according to the Real Estate Economic Research Institute. Units in Tokyo cost an average 56.4 million yen, according to Tokyo-based Haseko, which builds condominiums.
Abe’s stimulus plan may also include relaxing restrictions to allow developers to construct taller office and apartment buildings in urban areas.
Tokyo’s successful bid for the 2020 Olympic Games is also bringing a new wave of home-buying interest in the city. Visitors to apartment showrooms in the Tokyo Bay area where the Olympic Village will be built doubled after the Sept. 8 announcement, according to Mitsubishi Estate Co., Japan’s biggest developer by market value.
The developer said yesterday that all 22 apartments, including units that costs as much as 542 million yen ($5 million), at a building near the Tokyo Imperial Palace it acquired two years ago from a construction company and developed into condos, have been sold.
About 20 percent of residential areas in Japan will become ghost towns -- devoid of population -- by 2050, according to a land ministry forecast. Once an area reaches a tipping point of 20 percent home vacancy, it quickly turns into a ghost town as remaining residents flee seeking improved access to services and shops that inevitably close, Nomura Research’s Sakakibara said. Inariyato is about to reach it.
“The social impact of vacant homes is huge,” he said. “Local areas will lose their vitality as more and more homes become empty.”
In the U.K., just 2.3 percent of dwellings are vacant, according to the Department for Communities and Local Government in London, and 11 percent of homes in the U.S, according to the U.S. Census Bureau. Just 2.6 percent of Japanese homes were vacant in 1963, according to the Ministry of Internal Affairs and Communications.
Yoshie Okada, 64, remembers those days. In Inariyato, Okada runs the public bath her grandfather acquired just after World War II. Sitting at a high-rise wooden counter in the middle of the separate bath entrances for men and women, collecting 450-yen fees, Okada said the number of bathers has halved in recent years.
“We don’t see many young people here,” said Okada, who looks two decades younger than her age, as beads of sweat ran down her neck in the heat. “We don’t know how long we can continue our business, as the majority of our visitors are elderly.”
The public bath, called Kame No Yu, which means bath for turtles, a symbol of longevity in Japanese culture, is one of two that are left in the area out of about five, she said.
The number of elderly in this area of Yokosuka, on the other side of the train tracks from the U.S. Navy base, have more than doubled in the last three decades from 1983, while residents younger than 15 have dropped by half, according to a survey by Yokosuka’s city government in 2011. The city’s population has fallen 3.5 percent over the past two decades, according to its planning material. People 65 and older account for more than a quarter of Yokosuka’s population of 418,325, according to Statistics Bureau of the Ministry of Internal Affairs and Communications.
Businesses have closed. Saikaya Co., a 62-year-old department store, shuttered one of its three Yokosuka locations in 2010 after filing for bankruptcy because of declining sales, according to statements released by the company.
The 2,600-square-meter (27,987-square-foot) store was sold to Ichijo Co., a Tokyo-based condominium developer, which later canceled its plan for a 23-story apartment building and is turning the space into a parking lot.
“The construction of more new housing only leads to more vacant homes,” said Noriyuki Shima, chief examiner of Yokosuka’s planning commission who is in charge of luring home buyers to the city, including the Inariyato area. “It’s best to put a stop to this.”
Residential land prices in Japan are still half what they were after the peak of the bubble economy in the 1980s. Prices for residential land sites in Tokyo have declined for each of the past 22 years except in 2007 and 2008, while the prices for land sites in regional areas have dropped for 21 years, land ministry data show.
The Ministry of Internal Affairs and Communications conducts a national housing and land survey every five years. The next one is scheduled for later this year, with results to be announced next year.
Abe has promised to loosen business regulations and increase government support to help Japan’s industry as part of the “third arrow” of a three-pronged strategy to end decades of deflation and achieve a 2 percent inflation rate with fiscal and monetary stimulus. Government officials have also said they may consider relaxing development rules in certain zones to meet demand for office buildings and residential space in metropolitan areas.
Part of the reason residents have left Inariyato is that it’s hilly. Some homes can be reached only on foot, though they reward residents with a view of the port. Those who came in their 30s or 40s a few decades ago now find it difficult to climb up and down in their elder years, said Shima of the planning commission.
“Now that the population is declining, the residents in the area all want to move down from the hill, but some just can’t because they will have to sell their land at a loss,” said Mitsuko Usuki, a 66-year-old resident who 10 years ago was able to move from her home of 30 years, renovate it and rent it out, in order to be closer to the train station.
She had purchased a second home next door to her original dwelling in 1997. After demolishing it, she now wants to sell the land -- for 40 percent below what she paid.
“There’s a debate going on within the city as to what to do with those vacant homes,” said Shima. “Some suggest we do nothing, returning the land back to nature. Others argue that we should find ways to revitalize some of the neighborhood.”
The lack of a secondary housing market has helped contribute to the rising number of vacant homes, Fujitsu Research’s Yoneyama said. Transactions of previously owned homes account for 14 percent of the total in Japan, according to the land ministry. That compares with 90 percent in the U.S., 86 percent in the U.K. and 64 percent in France.
“Japan needs to head in the direction of expanding the secondary housing market and reducing the number of newly built homes,” said Yoneyama. “What’s contradicting that is more and more new homes are now being built to capture the demand ahead of the government’s plan to raise taxes.”
Japanese houses also have shorter lifespans than those in the West -- just 30 years on average, partly due to the poor quality of the housing constructed prior to 1980s, according to estimates by Yoneyama based on data from the land ministry. In the U.S., the average is 55 years, and 77 years in the U.K., according to the land ministry.
Yuta Ishikura, 29, a father of three, who has lived in Inariyato for eight years, is considering moving to Yokohama, about 30 minutes away by train.
“My wife and I are both working, so we need someone to look after our kids,” said Ishikura, in jeans and a T-shirt by California surfwear designer Shawn Stussy. “Yokohama offers after-school programs for kids, which is just what we need.”
The government faces a challenging task in creating more efficient urbanized areas while at the same time stemming the rise of vacant homes, Yoneyama of Fujitsu said.
“It’s becoming more of an urgent issue, and it is important to come up with measures to resolve it because the time is running short,” he said.
Japan can maintain the percentage of vacant homes at around 15 percent if the government starts introducing measures to encourage the owners to tear down vacant homes, Sakakibara of Nomura said.
“It used to be common that parents find ways to increase the value of what they have and pass it down to their children,” he said. “But now, one can no longer expect much.”
To contact the editor responsible for this story: Andreea Papuc at email@example.com