The Real Estate Companies Association of Japan

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REAL ESTATE in Japan

HOUSING (For-Sale Transactions , Leasing , Real Estate Transactions)

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  • OVERVIEW OF MAJOR REAL ESTATE SECTORS

Housing-related real estate business, which provides the residences foundational to citizen life, can broadly be grouped into for-sale property, in which land and building rights are sold, leasing, in which properties are let in exchange for rent, and real estate transactions, in which land and building sales or leasing is brokered.

Following the war, there was a severe lack of housing due to the mass burning of cities. As a result, housing supply was deficient by 4.2 million units at the end of the war. In the mid-1950s, an explosive growth in the population concentrated in major cities began to occur alongside Japan’s rapid economic growth. The ensuing increase in land demand sent land prices soaring, making the situation for housing even more severe. The Japan Housing Corporation (presently the Urban Renaissance Agency) was launched in 1955 as the trump card for eliminating this housing problem and it began to supply “danchi” or apartment complexes en masse. These danchi spawned residential districts and led to the construction of so-called “new towns” and the development of new city areas. As a result, in 1968 the number of housing units surpassed the total number of households.

In general, housing is divided into apartment buildings and houses, chosen based on lifestyle, preference, etc. In recent years, the government has set out policies focusing on stock use and is developing systems to transact old housing and stimulate renovation.

For-Sale Transactions

  • History of For-Sale Condominiums

During the period of active danchi development after the war, most for-sale properties were houses. Looking at new housing constructions statistics, approximately 5,000 for-sale units were started in 1951 and most of these are thought to have been houses. After that, the number of for-sale residences constructed gradually increased, surpassing 100,000 units in 1969, for reasons including the Japan Housing Corporation beginning to supply danchi condominiums.

Around this time, luxury condominium sales began in the very convenient downtown Tokyo and major real estate companies entered the market. The Government Housing Loan Corporation (presently the Japan Housing Finance Agency) began financing condominiums in 1970, numerous high-rise condominiums appeared and they very quickly became widely accepted.

In 1985, there were approximately 220,000 for-sale property units, 120,000 of which were condominiums. In 1992, the fixed-term leasehold system* was established and condominiums using it began to also be supplied.

In the 1990s, after the collapse of the bubble, corporate business restructuring led to the sale of factories and employee housing, and condominiums were built on these sites. Downtown areas in particular, especially the Tokyo Bay area, saw a large number of super-high-rise condominiums developed.

Once this corporate land sale settled down, redevelopment projects downtown and near train stations began to increase.

  • Diversifying Housing Needs

With the advent of a serious decline in the birthrate and the super-aging of society, the segment of the population buying condominiums has expanded from the traditional family segment to include DINKs, singles, retired individuals seeking to change their residences from standalone houses in the suburbs to downtown locations, etc. These trends and changes in lifestyles and tastes are diversifying the needs for condominiums. In response to these diverse needs, condominiums in various size ranges are being supplied and various options are offered such as condominiums with commercial facilities being developed on large-scale sites, large-scale 005 Real Estate in Japan • Real Estate in Japan • OVERVIEW OF MAJOR REAL ESTATE SECTORS HOUSING condominiums equipped with communal facilities such as party rooms and guest rooms, green condominiums that focus on energy conservation and environmental harmony, and condominiums developed with a variety of designs. Efforts regarding disaster preparedness measures such as base isolation and damping structures, securing of emergency power supply, setting up warehouses with stockpiles in the event of a disaster, etc. have also become of greater concern since the Great East Japan Earthquake of 2011.

  • Old Condominiums being Rebuilt as Stock Increases

Condominium stock increases every year, exceeding a cumulative 6.4 million units. Of these, more than a few are old condominiums that do not conform to regulations since the Building Standards Act was enacted, sunlight regulations were introduced or the multiple times earthquake resistance standards were raised. Furthermore, due to advances in infrastructure, construction methods and developer product design, some condominiums have no elevators, pose difficulty in renovating piping or have become obsolete. These may need to be rebuilt.

In 2002, the Ministry of Land, Infrastructure, Transport and Tourism revised the Act on Building Unit Ownership to relax the rebuilding consensus requirement and implemented the Act on Facilitation of Reconstruction of Condominiums. This made it possible for condominiums with a rebuilding consensus to form a rebuilding association that would lead the rebuilding. In 2014, this Act was revised to include a Condominium Lot Selling System for selling off land by removing it from compartmentalized ownership based on an 80% majority vote, making it possible to revitalize it for other uses such as commercial facility. However, progress in rebuilding condominiums is not reaching national targets for reasons including difficulties in forming consensus and problems with sunlight regulations.

  • Growing Importance of Condominium Management

It is standard for a management association made up of unit owners to be responsible for and handle condominium site and common area management. In many cases, the management association collects a management fee from the unit owners for management task expenses and hires a condominium management company.

In 1982, the Ministry of Construction (now the Ministry of Land, Infrastructure, Transport and Tourism), created the Mid- and High-Rise Apartment Management Rules (now the Condominium Management Rules). Having made revisions when appropriate since then, many management associations have maintained their condominiums by formulating long-term upkeep plans, collecting upkeep funds from unit owners and implementing planned upkeep based on these rules

On the other hand, because laws and regulations such as the Act on Building Unit Ownership were developed following condominium construction, some of those built before the legal framework have no management associations or non-functioning ones and are thus problematic “partially- managed” condominiums.

Flow Chart of Condominium Business
※ Click image to enlarge

Leasing

After the war, the rental housing market shifted from public rental housing provided by public housing corporations to address the housing shortage to good-quality rental housing provided by the private sector. In particular, the luxury rental housing market has entrenched itself as a strong market in central Tokyo.

In recent years, changes in the environment around the rental housing market such as the falling birthrate and aging of society, diversification of needs and population decline have produced a variety of measures. Developments include serviced elderly housing, for which a registration system was introduced in 2011 and which primarily targets residents over 60, offering support services such as life consultation and safety checks, rental apartments for students by major companies to meet student demand as both the number of exchange students and the rate of educational advancement rise.

Real Estate Transactions

  • Modernization of Real Estate Transactions

The real estate transaction (brokering) business, which involves the brokering of land and buildings through buying, selling and leasing, has a long history and is thought to be the origin of the real estate business.

Due to the many problems surrounding real estate transactions in the turmoil after the war, a registration system for these brokers was established in 1952 with the establishment of the Building Lots and Buildings Transaction Business Law in order to protect client profit and achieve healthy growth of the real estate business. This was revised to be a license system in 1964. After that, the number of companies rose dramatically through the end of the 1960s with the concentration of industry and the population in major cities and growth in housing demand. This was right around when major companies began entering the industry. Along with modernizing the real estate transaction business, this served to bring the business under the eye of society, including the coordination of roles and responsibilities among major as well as small and medium-sized players.

The Building Lots and Buildings Transaction Business Law was revised in 1980 in response to social demand to clarify the contractual relationship between the parties, establishing a general and exclusive broker contract system.* Documentation for certain items was required and exclusive broker contracts were registered with an information network organization. Then in 1990, a dedicated exclusive broker contract system* was started to promote the sharing of property information, making it mandatory to register these contract transactions on REINS (Real Estate Information Network System), a certified information network organization integrating the information network organizations by supply/demand region.

The government is setting out various policies to vitalize the real estate transaction market by creating an environment in which consumers can confidently choose and purchase existing residences. The 2018 revision of the Real Estate Brokerage Act makes it mandatory for housing agents to include whether or not an inspection of the building has been conducted and a summary of the inspection results in their explanation of important matters or delivery of a written document when signing a brokerage agreement, explaining important matters or concluding transaction agreements.

Flow of Real Estate Brokerage Work
※ Click image to enlarge
  • Renovation During the Stock Era

In 2006, a new Basic Act for Housing was executed, introducing a government policy of focusing on using existing stock through renovation in response to the diversification of housing needs and abundance of stock.

Renovation can mean either repairs or improvement; adding new value to an existing building. In the real estate transaction industry, a business model of proposing repair and improvement as a set when brokering is on the rise. Among property sellers, an increasing number of companies have begun “flipping” properties – buying an existing building, renovating it and selling it.

In 2016, the Real Estate Brokerage Act was revised to promote the use of inspections by experts, and in 2018 a system (Anshin R Jyutaku System) began in which marks are granted by trade associations registered with the Ministry of Land, Infrastructure, Transport and Tourism to properties that clear standards regarding renovations, etc.

Along with the creation of new, high-quality housing stock, this is expected to promote the use of existing stock.

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