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Friday, Jan. 13, 2006

REALTOR EXPECTS SCANDAL MEMORY TO FADE

Aneha scam making buyers wary, for now


Staff writer

To buy or not to buy a condominium? That is the question people are asking, fearing the slipshod construction borne out in the widening scandal over the falsification of quake-proofing data might be industrywide.

News photo
Architect Hidetsugu Aneha gives sworn testimony at a Lower House committee Dec. 14.

In the greater Tokyo area, sales will hold strong in 2006, forecast Tadashi Matsuda, researcher at the Real Estate Economic Institute Co.

Matsuda said he expects developers to put 85,000 condos on the market in the Tokyo metropolitan area this year, on par with the 85,244 units estimated to have been offered in calendar 2005.

"Of course, we're assuming other developers will not turn out to have been involved in fudging quake-proof data," he said. "A few more companies may turn up guilty. But I believe we've seen the worst."

It was revealed in November that architect Hidetsugu Aneha had falsified the structural calculations on building plans for about 20 buildings to make them appear, at first glance, to be quake safe. Since then, more structures have been added to the list, several hotels have had to close and now face razing, and scores of households had to vacate relatively new, and expensive, condominium complexes deemed unsafe in the event of a strong quake.

In December, investigators searched over 100 locations in Tokyo and five other prefectures to gather evidence in the fraud.

Industry analysts and real estate agents are not worried. They reckon the condo market may have a slight lull through the spring and buyers may gravitate away from small developers, but overall appetite is strong.

In the greater Tokyo area, over 80,000 condo units have gone on sale every year for the past seven years, of which buyers have snatched up more than 70 percent.

Even after the Aneha scam came to light, condo sales remained strong. About 83.7 percent of units put on the market in November were sold in the same month, up 3.3 points from the previous year, according to the Real Estate Economic Institute.

"With interest rates at an all time low, I expect the strong sales we've seen over the past seven years will continue for another decade," Matsuda said. Only a few developers he polled planned to slow down, he said.

The biggest change, real estate agents say, is that people are getting more information before deciding to buy.

People who want to buy or rent are waiting for the investigation into the building scam to be completed to see just how many buildings are not up to government quake-resistance standards, said Yuichi Hosokawa, section manager at Ken Corp., a real estate broker in Tokyo specializing in high-end condos.

"People are doing their homework, asking questions about the building plans and asking for second opinions -- they're waiting a little longer than they did before," Hosokawa said. "But I don't see the overall pie shrinking."

According to an Internet poll on the real estate Web site Home's, run by Next Co., a firm that provides real estate information, one in three people who were planning to move into a new home said they will watch and wait instead.

The survey was conducted Dec. 2-3 on 1,033 respondents in the greater Tokyo area, including Saitama, Chiba, and Kanagawa prefectures, and in Kyoto, Osaka and Kobe in the Kinki region.

Market analysts say the biggest change affected by the Aneha incident is not consumer demand, but attitude.

Buyers are demanding better quality -- a dramatic change in a market in which the suppliers called most of the shots and consumers went along quietly.

Consumers are now asking for more details about a building's earthquake resistance, along with their other standard lifestyle queries, Matsuda said.

And that is polarizing developers, analysts figure.

"It's going to take a while for smaller developers to dig out data on compliance and show what they subcontracted to whom," said Junko Miyakawa, associate director at U.S. ratings firm Standard & Poor's.

Smaller developers do not have the money to keep an in-house architect or manage compliance matters, she said.

Both police and the Land, Infrastructure and Transport Ministry have promised to find out how many substandard condominium complexes are out there, suspecting Aneha did not act alone.

In the Aneha scandal, only a handful of developers have released statements claiming they have never used any Aneha-drafted plans.

Among them are Mitsubishi Estate Co. and Mitsui Fudosan Co., two of the three biggest three developers in Japan. Sumitomo Realty & Development Co., the third, has yet to issue a statement.

The public worries that small and midsize developers like the ones Aneha worked with could be selling luxury condos at low prices at the expense of safety. They are thus looking at more expensive complexes built by large developers, believing, for the moment, that they will be safer.

This flight to buy into huge condo complexes with small-town conveniences built in could severely reduce business for the smaller developers trying to provide low-cost units.

"We may be in for a flight for quality in the medium-term," said real estate agent Hosokawa. But he was skeptical about the long-term fallout over the data fudging scam.

Homes built after the war were built to last only 30 or 40 years, and people have been relatively forgiving about standards, he said.

"The Japanese are quick to forget" about scandals, Hosokawa said.



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