Thursday, October 31, 2013

Waterworks

So here were are about to become landlords. Hello that unearned income I have always dreamed about. Japan blogs are always full of foreigners moaning and ranting about how Japanese landlords are all racists and thieves, all of which sounds pretty good to me. Around this time I came to learn a couple of new words which are shaping up to be my number one favourite words in the whole Japanese language. The first one is "Reikin". This literally means key money. When I first heard of it I thought, no way, surely nobody gets away with that old scam anymore. Kiwis would tell you where to stick your house if you demanded key money from them. Not here it seems. For us it means a nice little Y100,000 present. The other word is "Shikikin". This means bond money and is a concept I am familiar with as it is common practice everywhere. In theory the bond is refundable when the tenant moves out provided that they have not damaged anything in the house. In practice it seems that this almost never happens and that the Shikikin is just another present for the landlord. That's another Y200,000 thank you. Add to this one months rent paid in advance and the fact that some landlords also require a guarantor and you can start to see why there is so much wailing and gnashing of teeth around this subject. 

But before we can book the holiday to Hawaii with the proceeds of these cash presents we must deal with the not so insignificant problem of lack of water. Anyone who knows anything about Japan knows that it's not a desert country. It rains plenty, especially here in the Kyoto mountains. There are more streams and rivers and lakes than you can shake a stick at around here. So how can water be a problem you ask? well, The whole problem revolves around geography, history and economics with a dash of politics thrown in for good measure.  

The history part has to do with the legacy of the by now almost mythical "bubble economy". The condensed version of the bubble time goes something like this....From the mid 1980's to the early 90's the export led economy boomed. Land prices in the big cities went through the roof. Wages and inflation soon followed. Property speculation was all the rage, the stockmarket was a quick and easy way to get rich and life was one big party. Until some bigwig at the bank of Japan noticed that things were getting out of hand and got together with the government and the banks. Before you knew it there was a capital gains tax of 30%, tightened credit and higher interest rates. The economy faltered, the stockmarket crashed and the land price bubble went POP. Hello the "lost decade".
 
This whole area is an unfinished product of the bubble economy period. The Subdivisions that sprung up on the sides of steep mountains to the north of Osaka were far away from any train stations or highways. The rationale of the developers was that if the houses were built the city would follow up with the infrastructure. As their was no existing roads or water supply the development companies had to create them from scratch and each individual subdivision had it's own water system built and run by the separate development companies. Land was surveyed, roads and pipes laid, electricity poles erected and foundations built. The first houses went up around 1992 and people had started to move in to them when the bubble burst. Suddenly there was no demand for these developments and as the customer base dried up the development companies went bankrupt one after another. Today most subdivisions in this area have only about 40-50% of the houses that were originally planned to be built. Of the houses that were completed, many of them are now empty as mortgage foreclosures and the lack of transport infrastructure caused people to leave.
So that is the story of Hatano-Cho and of many of the areas on the fringes of the big Japanese cities.

Now water is readily available in this place. It's clean and fresh and plentiful. All you have to do is distribute it to the houses. The local water schemes consisted of wells with reservoirs, pumping stations and networks of pipes. Once the developers had gone bust there was no one to administer or maintain the systems. The local government bodies were unwilling to take over and so evaded the responsibility and it fell to the local residents to form committees to run their own schemes. This they did successfully for 20 years but eventually the ageing locals decided that they didn't want to maintain the ageing systems anymore.  

This area is politically part of Kameoka city despite the fact that it is separated from the town by a fairly substantial range of mountains. It is actually closer and easier to access from Nose town which has a city water supply but that is in Osaka prefecture and so may as well be on the moon because the chances of some common sense cross border co-operation are less than zero. Hatano-cho may be the most unloved and ignored outpost of Kameoka city but no city bureaucrat worth his salt is ever going to cede an inch of territory or control to his neighbour. So a few years ago all the water committees got together and asked the city to build a pipeline over the mountains and connect the area to the water grid. This was duly done but there was a catch...everybody who wanted to hook up to it had to pay a connection fee of Y1.2 million. There was a lot of dissent over this among the locals but the upshot has been that the local system was decommissioned in May 2013, the city system is in place now and there is no alternative. Unless you are a Kiwi and can think outside of the Japanese square, but that's another story.

So, to enter the sacred halls of landlordship we have to fork out Y1.2mil to connect the house with water. But wait, there's more. That doesn't include the actual hooking up the pipes and so on. That's another Y300,000. Plus the fact that the water heater was pronounced dead in August 2012. This one I didn't mind so much...that heater sucked. Who uses kerosene to heat water these days? It's a stupid idea and I was happy to see it go along with it's tank and blue plastic containers that cluttered up the hallway. A brand new Rinai LP gas system set us back Y200,000 and well and truly scuppered the Hawaii plan.

The water heater installation was the usual Japanese circus of technical experts, wads of cash, excruciatingly detailed instructions and, as usual, unbelievable punctuality. As I was staying in the house that night I asked the gas company man to open the meter so I could have some hot water for the next 3 days. This sent him into the standard "no can do...youre not signed up as a customer" line but with a bit of arm twisting he agreed to leave it on if I promised to pay for the gas I used before leaving for NZ. That evening as I stepped into the shower and turned it on, I was keen to try out my new water heater and I have to say it worked great...for about 30 seconds, at which time it instantly went from hot to freezing. A call to the gas company at 5.30PM had them promising to be there soon to sort it out. At the time I did not know that their depot is on the other side of Kyoto...about an hour and a half's drive at the best of times. This was now peak traffic hour and it was nearly 8.00PM by the time they showed up. I've said this before... Ain't no way any NZ tradesman would do this. As it turned out, all that was needed was to reset the meter which took about 2 Min's. Off they went leaving me feeling a little bit guilty about extending their working day by about 3 hours but then I figured that hey, this is Japan. Cest la vie.

And so onto the next water related issue...the drains. Drains are one of those things that the old adage "out of sight - out of mind" applies to. As long as they do their thing, who cares about them. I hadn't really given them much thought until while testing the shower I noticed that it wasn't draining well. Great. The next morning lead to an thorough investigation in the the drainage system. Luckily a bit of spade work had the drains cleared in short order but I was quite amazed at how the grey water, ie the washing machine, sinks, shower etc, just runs out in to the open culvert on the street. Pretty third world if you ask me.

It's all glamour being a property tycoon let me tell you.



Wednesday, October 16, 2013

Adventures in the Real Estate Trade


Some of you regular readers will recall that the original purpose of this blog was to document our adventures in the Japanese housing market. I will admit to being much remiss on this front. So to make up for this negligence here's the story so far..... After deciding that we did not want to live full time in Japan, Shizuka's instinct was to sell the house. I was more in favour of renting it out but the thought of a quick profit is always enticing so I went along with it.

We had talked to a local agent in Kameoka around the time we finished the renovation project. He was a very quiet unassuming fellow and we sort of wrote him off as being not so interested in marketing our house. Once back in NZ Shizuka did some research and found an agent in Nantan. Our salesperson took some good photo's and had some enquiries but none of them really lead anywhere. She called when I was in Japan with news that she had a customer who wanted to see the house. This was the day after the Typhoon/tree falling incident and Shizuka told her not to bring him as the place was a mess of broken trees, broken roof and broken car. She decided to ignore that advice and proceeded with her viewing. The results were entirely predictable with the customer taking one look and running for the hills. As the months went on she seemed to lose interest and once the sole agency agreement expired we decided to find someone else. 

Next up we contacted Century 21 in Kyoto and were assigned a super enthusiastic sales guy. He quickly had some ads done and before long he came to us with an offer from an interested buyer. The offer was conditional on the buyer obtaining finance which we figured should not be a problem. Done deal. Or so we thought... What happened next was yet another lesson in how frustratingly senseless and inflexible the bureaucracy in this country can be. Here is our understanding of what ensued. 

The potential buyer was a widow who lived locally in a rented house. She had been given notice by her landlord and had to find somewhere to live quickly. Her son was a policeman and had agreed to help her buy a house by becoming a co borrower with her. They had seen the add for our house, contacted the agent, arranged a viewing, then a second viewing and had put the offer in. Next the agent had the contract drawn up and everything was a go. The buyers then dropped the bombshell that they had no money and would be seeking a 100% mortgage from a bank. At that point both the agent and ourselves thought that this was not necessarily a show stopper, after all, Y5,000,000 isn't exactly a lot of money. The son has a good job, good credit history and has no dependants so has some chance of pulling this off. A week went by. Then news that they had been approved by the bank and that there were just a few formalities to be observed around the usual paperwork that plagues the average Joe in this land. The buyer had to supply his Koseki (Family register certificate) to prove his relationship to his mother and his Juminhyo (certificate of residence) to prove he actually does exist and has a place of residence along with proof of income and the other various things that one needs to obtain a mortgage. And this is the point where we depart from reality, or at least my version of it. The policeman's Juminhyo had his registered address as his police barracks. Apparently some cops live in accommodation supplied by the police department. This address was in Shiga Prefecture. Our house is in Kyoto Prefecture...right next to Shiga. The bank refused to advance the money unless he changed his registered address to the house he was about to buy. The principle being that if you want to borrow money for a house you have to live in it. The cop didn't think that was a problem... who's going to know if he actually stays there and as long as he pays the mortgage who really cares? Well it turns out that his employer cares. When he approached his boss at the Shiga Police for permission to change his residence to Kyoto he was told bluntly that in Japan, a cop (or a junior one at any rate) must reside in the same prefecture that he is employed by. And just like that, our deal was dead in the water. The widow was gutted, the cop, bewildered and the agent irate that these people had wasted so much of his time. The cop asked for some time to try a finance company but the agent told us that the only kind of lender that would finance him was exactly the kind that police  were expressly forbidden from having dealings with.

 I could not believe that A) the bank could be so inflexible, B) the agent had not qualified the buyers...ie. asked them how they were going to pay for the house, BEFORE he went through the whole process and C) the buyer's embarked on their search and signed a contract without having first talked to their bank.
This last one, I was about to find out is exactly what everybody here does. Where I come from people look at adds for property, talk to some agents, maybe go to some open homes but before anybody signs any contracts they talk to their bank and find out whether they can actually follow through. 

Anyway.....Century 21 man soon has another potential buyer for us. This guy tells us he wants to buy the house, puts in his offer which we reject and then proceeds to negotiate hard. Back and forth we go for a few days until we reach an agreement. He then informs us that before he will proceed he wants to check that the street can get high speed internet coverage and that it's in the right school zone for his kids.  As usual it's ass backwards from the Western norms I am used to. Why the fuck would you not do all this before you start making offers? So I wasn't really surprised when he pulled out of the deal because, yep, it's too far from his kids' school of choice.

After that our sales guy seemed to wane. . around that time he was the one involved in the great agent - builder face off. He had been sending us weekly reports on enquiries but these became fewer and farther between and suddenly stopped. A call to his office yielded the helpful revelation that he had left suddenly due to an unspecified illness....reading between the lines we got the impression that the illness was of the mental variety. His replacement left us in no doubt that he was not in the least bit interested in inheriting our account.

We had taken out an add on a website where owners advertised their own properties. It is becoming more popular to do this in NZ but Japan is a bit behind in this trend. We got one hit from a man from Tokyo. He was retiring soon and was looking for a place in the countryside. He had looked at the photos and decided that it was exactly what he wanted and wanted to send us the money straight away. By now we have become pretty cynical about Japanese house buyers and told him that we would not enter any arrangements until he had got all his ducks in a row. We arranged for him to come and see the house while I was there but he postponed the day before and did not come to see the house until after I had flown back to NZ. It seems the day he arrived it was raining and that he was alarmed at the fact that one of the gutters was leaking onto the ground due to a twisted bracket. This he deemed to be a huge problem and consequentley he would not buy the house. We did not even bother to point out to him that a new bracket would cost about Y100 and take all of 5 minsutes to fit. Reason and logic has no place in the mind of the typical Japanesehome buyer.

So, while in Kameoka in summer 2012 I went to see the Agent we had talked to first. His quiet, understated way had put us off before but I figured that it was worth a try. The bigger agencies had shown us that they weren't interested in the more challenging cheaper properties so I thought that a small local agency might be a better bet. He suggested that renting the house might be a better outcome for us and I quickly came to the same conclusion. He explained to me that Japanese people just don't have the experience that westerners have with property. Most of them will only ever buy one house in their lives...usually a new one from a development company. They just don't know how to go about the process hence the time consuming, ridiculous, back to front way most of them approach it. That made some sense to me. I told him to go ahead and try to find someone to rent the house. Within 2 months I was back in Japan preparing the house for the tenant he had signed up for a 2 year lease.