The government seems to be pushing for policies that will promote renovation of existing homes. In early August, Nikkei reported on a newly created government subsidy of up to 500,000 yen per property, in relation to the necessary costs for renovation when buying an existing house. In the same paper, it was claimed that the policy would be submitted for the autumn extraordinary Diet session starting on September 13th, and would be put into action within the year. This system would apply to homes less than 40 years old, and would require a housing diagnosis by an expert.
Talking of housing subsidies brings to mind the "Housing Eco Points” subsidy that was put into place in 2010.
The original plan was for this system to give up to 300,000 points (1 point being worth 1 yen) for the purchasing of or renovations using solar panels, window or wall insulation, and increased accessibility installations. The plan was for this system to last until the 100 billion yen budget ran out, but it was received so well that further funding was added. In 2011 following the Great East Japan Earthquake, the extension and resumption of the Eco Points system was carried out in areas requiring reconstruction assistance, and the total budget was raised to nearly 500 billion yen.
At the same time in 2010, the housing market was still sluggish due to the influence of the 2008 Lehman shock. According to data from the Ministry of Land, Infrastructure, and Transport, new housing production went down by 25% from 1.039 million units in 2008 to 775,000 units in 2009. In 2010 this had slightly picked up, reaching 819,000 units. However this was far from covering the decrease in 2009.
Meanwhile, the introduction of the Home Eco Points system meant that there was a sharp rise in the proportion of eco housing. A Mizuho Research Institute analysis showed that while "it cannot be interpreted that this system increased the number of new housing constructions", "the trend of eco housing was definitely increased".
Further, due to the same system, 2009 and 2010 were calculated to have had an increase of 180,000 renovations with the aim of making the properties low energy.
Aside from this result, reports and analysis such as the Japanese Research Institute's report announcing "an expected increase of up to 390 billion yen in the 2010 renovation market as a result", showed a positive influence on the renovation market by this system.
There is no doubt that the renovation market, as well as new housing, were greatly damaged by the Lehman shock. However, the housing renovation market that had dropped to 5.3 trillion yen in 2009, had recovered to 6.9 trillion in 2013 (According to the Yano Research Institute). Following this there was a downward trend, but it remains above the pre-Lehman shock level. ? The renovation promotion policy being reported about here is relatively small scale compared to the Eco Points system, only applying to buildings less than 40 years old, and having an initial budget of 25 billion yen.
Due to this how much of an effect it will have is currently unknown. However, "Housing Eco Points" applied to new constructions, while this one only applies to existing housing. Further, depending on its uptake, it is possible that the budget may be increased greatly, just as the Eco Points system was. If that happens, it will almost certainly boost the renovation market.
The introduction of this system can be seen as part of the government's ongoing push to decrease the nationwide increase of vacant houses, promote renovation, and ease the over-concentration of population in urban areas.
Further, it seems that even local governments will continue to push these renovation promotion policies, with the start of such enterprises as Nara's subsidies of up to 400 million yen per property for refurbishment of vacant housing.
Starting with Tokyo, the prices of condominiums in urban areas continue to rise, and are reaching high levels that normal office workers can't afford. On the other hand, a trend towards reconsidering existing housing due to the increased costs of newly constructed housing is spreading, and it seems that the renovation market is receiving a boost from both the real estate market and government policies.
Sep. 16, 2016