The following is a translation of a Nikkei Business interview with Osamu Nagashima – real estate consultant and head of home inspection company Sakura Jimusho.
What impact did the Tohoku disaster have on the housing market?
Nagashima: Prior to the disaster, the property market was showing positive signs of a recovery. Low interest rates and eco-points for housing had begun to push the market out of the slump caused by the 2008 Lehman Shock. Developers had put their energy and resources into developing family-type condominiums. The disaster has put a stop to all of this development.
After the diaster, a property’s standard of value changed greatly. It is difficult to say what will happen to the value of the the previously popular “Tower Mansions” (high-rise apartments) and all-electric properties. There is also an anxious wait to see how the government will compensate those who lost their homes in the disaster. This will influence the movements from here on.
At the present point, do you have any predictions?
Nagashima: As a criterion for choosing a house, its disaster-prevention ability will be scrutinized more closely. This will include looking at the lay of the land such as its relative height, whether it is on solid ground and checking the hazard maps.
With regards to the height of the land, this refers to its height above sea level as well as the height of the surrounding areas. Even in elevated areas, if the land is lower than the surrounding area then it may be at risk of flash flooding.
Also, Tokyo’s bayside areas experienced liquefaction during the March earthquake. While the serious damage in Urayasu City was the focal point of the news, liquefaction was not limited to just the bayside areas. Until now, the liquefaction risk level did not have an impact on land prices, but from now on it is expected to have a direct correlation to price.
At the time of signing a purchase contract, the licensed real estate agent does not have any obligation to inform the buyer of the risk level of liquefaction for the property being purchased. It therefore becomes necessary for the buyer to research the area to find out for themselves.
What about the effect of the disaster on buildings?
Nagashima: Naturally, the number of people who put a preference on the earthquake-resistance of a building will increase. As for the insulation and energy efficiency of buildings, we will have to take a second look at the effectiveness. Without looking at the mechanical facilities, if the structure of the building has remained strong, then it has shown some degree of durability.
While it is easy to maintain and insure the soundness of the structure of a brand new building, it may be necessary for full-scale renovations of older properties. Currently, the government is working on providing support for renovations, so from now on we are expecting renovations to become easier. If we continue with renovations such as earthquake-retrofitting and installing energy efficient products, then the disaster prevention measures will have much more meaning.
At Sakura Jimusho, you conduct home inspections on behalf of buyers. Have you noticed any change in consumer demands over the recent years?
Nagashima: Since establishing the company 12 years ago, we have seen the number of inquiries increase greatly over the past 2 years. Despite the severe drop in property sales following the disaster, we have seen a large increase in the number of home inspections. People who were considering purchase a property prior to the disaster want to know if it sustained any damage following the earthquake.
Following the disaster, would you say that consumers have not lost their desire to purchase homes?
Nagashima: If they have no concerns about the quality then there are still people willing to buy. At present, there are restrained buyers but I would not say that people have strongly decided against buying. There are many who are rethinking and having a second look at the disaster-prevention ability before they consider purchasing so this is taking some time. I have also heard examples of people who are looking to buy a much stronger and safer property to replace their current one.
What do you think the property price movements will be from now on?
Nagashima: The shortage of building materials following the disaster will lead to an increase in building costs. However, if developers pass this cost onto consumers, their properties will be difficult to sell. They will have to cut costs somewhere else and this will probably lead to restrained buying when it comes to potential development sites. When this happens, it will put downward pressure on land prices.
On the other side, residents who had difficulty returning home due to transport services being cut off, and those affected by planned power outages will push up the popularity of central Tokyo to levels higher than in the past. This may only be short-lived, however. From now on, price movements will not be uniform.
Do you have any advice for those looking at buying a home?
Nagashima: Although there are people who make the decision to purchase based solely on the fact that mortgage repayments are lower than their current rent, this will only be temporary. I want them to choose based on when they can foresee selling or buying again in the future.
Japan’s population is declining and so is the number of family households. Populations in the outer suburbs continue to age, while the remaining population is concentrating in inner city areas.
For example, even if you have no intention to sell your property in the future, the ability for you to live in it safely and comfortably for a long time is also considered an asset. I recommend thoroughly investigating the condition of the property’s location, including its disaster prevention ability prior to making the decision to purchase.
Nikkei Business Publications, July 4, 2011.
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