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Our mission is to unmask Japan to reveal the real consumer truths

Yay, Free Houses in Japan! Not So Fast, Friend.

Old Japanese woman cleaning temple grounds

by CarterJMRN


You can knock on the doors of millions of residences in Japan 24/7—especially out in the countryside—and get no answer. That’s because these places are akiya, a term usually translated as “abandoned houses” but which also applies to properties that are simply unoccupied for various reasons. They range from cheap McMansions to desolate rural farmhouses to Japanese billionaire Genshiro Kawamoto’s magnificent ruin of an estate. Here is the lowdown on what to make of this situation and the lessons for corporations in the real estate business.

The truth about the free houses of Japan

Not long ago, the global media started pumping out stories about communities withering away in Japan’s outback (and some in the suburbs) that were offering distressed properties for free, and even tossing in incentives. That word free inspires a Pavlovian response, and a lot of folks abroad perked up. Who could resist a free used house?

But when it comes to homes, most Japanese can and do. While between 70 and 90 percent of houses in Europe and the U.S. have been owned before, the Ministry of Land, Infrastructure and Transport (MLIT) says secondhand homes account for just 14.7 percent of Japan’s housing market.

Oh, and let’s get one other stat straight: The MLIT reported in 2013 that there were about 8.2 million places that qualified as akiya. That number, however, includes empty rooms and houses long available for rent but apparently totally undesirable. Only 2.2 million akiya are actually empty homes, and while a percentage of them are well and truly abandoned, most just have absentee owners.

Japan’s aging society

But that’s still plenty, and considering that Japan’s population is heading down, down, down, there will be loads more. People in Japan live long, but they aren’t immortal. By 2065, in fact, the National Institute of Population and Social Security Research predicts a 30-percent drop from just over 127 million citizens to 88 million.

Abandonment issues and money pits

So why are Japan’s “free houses” not so desirable, and rarely truly free?

Clear title is one big reason. Identifying the owner of an akiya property can be problematic, because property records are frequently not up to date, the last known owner is dead or gone, and nobody steps forward to claim the place. Someone who inherits a property is supposed to report that fact to officials and register ownership. There are no penalties for ignoring the edict, though, so they often don’t. The national government even passed a law in 2015 prompting local governments to penalize owners who don’t demolish or renovate their holdings. Few do, however, because they don’t know whom to punish.

Another major stopper is shoddy construction. Many homes and other structures built in boom times were cookie-cutter structures not made to last, and by now they’re sad, uninhabitable wrecks. A lot are also vulnerable to earthquakes because they were built on slopes, or when construction standards were looser, or both.

Abandoned houses aren’t necessarily charming

Then there’s the outlay to make an akiya livable. Cleaning and renovation costs—or razing what’s there and building something new—will often outstrip the perceived value of the place quickly. Property taxes of all kinds add to the burden.

Beyond the property lines more problems await, especially in rural locales where the lack of infrastructure—sporadic public transportation and few schools, hospitals and so on—and limited shopping and entertainment options make it hard for communities to thrive.

Buying one of these properties is a long-term commitment of time, sweat and money. And since the value of the property rarely goes up, you’d better be sure.

Bursting the Airbnb bubble

Last summer the Japanese government laid down some regulations that shattered the dreams of many an aspiring Airbnb mogul in Japan. “The new Minpaku [Private Lodging] Law brought order to a largely unregulated market of temporary private lodging, requiring owners to register their properties,” says Toshihiko Yamamoto, a real estate broker and primary author of The Savvy Foreign Investor’s Guide to Japanese Properties: How to Expertly Buy, Manage and Sell Real Estate in Japan. “That made sense from a quality standpoint, but the specifics—like capping stays at 180 days a year and forcing you to get the approval of all your neighbors—killed off a lot of potential.”

Moreover, local governments chimed in with their own restrictions, mostly citing noise and security concerns. Kyoto, for example, said having an Airbnb place was fine, but you could only rent it out between January 15 and March 16—blocking off the peak tourist seasons of spring and fall.

Shortages are forecast for the 2020 Olympic Games

Meanwhile, with the 2020 Olympic and Paralympic Games coming, Tokyo will be seriously lacking hotel rack space for visitors, with estimates of the shortfall ranging up to 14,000 rooms. (They’re even thinking of mooring cruise ships in Tokyo Bay to house Games attendees.) Private lodgings would take up a lot of that slack, which is why corporations are getting into the minpaku game.

On the plus side of real estate in Japan

Younger Japanese saddled with mom and dad’s old homestead may be eager to part with it, just to avoid the property taxes and the hassle of upkeep. What are known as akiya banks are where you’ll find listings for these properties, because traditional real estate brokers won’t touch them; the return on their time just isn’t worth it. Prefectures also have their own online databases of akiya.

Look around, and you’ll find akiya near ski resorts, lakes and other outdoor wonders. Kominka—Japan’s old country houses—can be worthwhile purchases because their bones are typically sturdy and they have more character than the typical home.

Another source of possibilities is a site called Ieichiba, launched in 2015 by a real estate consultant and architect named Tetsuya Fujiki. The site lets owners a chance to put their properties up for bids and negotiate with potential purchasers. Some of these properties are essentially free, and communities such as Okutama in far western Tokyo are willing to subsidize certain key demographics—young families, for example—to revitalize the area.

The future of living space in Japan

If the government’s regional revitalization plans and the teleworking trend we wrote about in this June 27 post work out, more people are likely to fan out into the countryside to live and start Japan’s rural heart beating again. That includes virtual businesses and ones driven largely by IT.

And there’s still reason to believe that Japan’s government bodies large and small may reassess restrictions on Airbnb-type private lodgings. If there’s any chance of drawing tourists in on a regular basis, taking over an akiya or five might prove a worthy investment, such as for a green tourism business. The same if you can come up with a valuable cash crop such as wasabi or blueberries or grapes for wine. Corporations in the real estate game may also want to explore the minpaku angle.