Sky tribes created by ultra-low interest?

"Sky tribes" created by ultra-low interest?

Perhaps you are aware of the term “Sky tribe”. No, it's not a Pokemon that flies in the sky. It means people who have emigrated to the higher floors of high rise apartments. The term "Sky tribe" started with the term "Sky moving tribes/families" which spread throughout Japanese media, primarily the internet, and later turned into "Sky tribes" (Kuchuu zoku). This May it seems the term gained a huge amount of attention when it was featured in an NHK TV program.

In early 2014, private consulting companies found that over 15,000 homes are planned to be constructed in the next few years in the coastal areas of Minato-ku, Chuo-ku, and Koto-ku, by gathering construction plans from major real estate companies and general construction companies.

Those called the "sky tribes" bought condominiums expected to rise in price, and sold them within a short period of time. With these gains, they moved to more expensive tower condos, and repeated the process.

In fact, the tower condo featured in the NHK program was bought for 40 million yen in 2005, and sold for 60 million in 2007. The owner then bought another condominium for 56 million, and sold it for 72 after another two years.

The point is, these "sky tribes" doing this weren't particularly rich, but were in fact company workers with incomes just slightly above average. For the wealthy, the goal would be investment. However for many of the sky tribes, their stance was one of wanting to live there while raising the value.

The sky tribes were born out of the climate of the current decrease of mortgage interest rates due to the Bank of Japan's zero interest rate policy, the movement of national bond yields into the negative etc, and low-risk low -return financial products decreasing relatively. Amid the continuing ultra-low interest rates, there seem to be more people appearing who are seeking higher yields even at the cost of some risk.

According to the Real Estate Economic Research Institute, although prices of new condominiums in the 23 wards of Tokyo suddenly dropped after the Lehman shock, they proceeded to rebound. As of 2015 the standard has reached 68.42 million yen, surpassing that of the pre-Lehman shock 2007 year (61.2 million JPY). Particularly ahead of the 2020 Tokyo Olympics, the construction of the Olympic village and other Olympics facilities in the coastal areas is accelerating. This may be pushing up the prices of new condominiums.

However, slight signs of decline have begun to appear for prices of newly built condominiums. Investigations by the same institute found that new condo prices in the first half of 2016 had increased by 8.2% compared to the previous year. While prices are obviously still rising, the number of units put on sale saw a sharp decline of 19.8%, making it the lowest level in 24 years since 1992. It seems the primary cause of this was the delay of the consumption tax rise from April 2017 to October 2019 causing the "rush demand" to disappear. However, when speaking only of urban areas, there are more than a few specialists who predict this modest rise will continue for the next few years. Even considering the upward trend of land prices, it doesn't seem prices will drop suddenly. These tower mansions have excellent views, and are located in the highly convenient coastal areas.

However in a complete reversal, what would happen with prices did drop? There would probably be Sky tribes unable to pay their high priced loans, which are ill matched to their income levels, forcing them to let go of the properties. Prices would fall further, and it is possible the situation that gave rise to sky tribes would see a total turnaround. While one can hardly say this would break the nation, it might lead to empty units in these tower condominiums located far from the nearest station and a side site of lights dotted only here and there on the building. (This is of course, nothing more than one possible eventuality).

In anticipation of such a situation, more than a few large real estate companies are interested in second hand properties. Second hand properties continue to see rising prices, and are relatively low priced compared to new constructions. Perhaps a new term will come about in the next few years; "Second hand Sky Tribes".

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