I am Gotanda, Representative of Multiface Co., Ltd.
Today, I will talk about the impact of the ’10 million vacant houses era’ on real estate investment and how to view vacant houses as an opportunity.
I think many people feel anxious about the news that ‘vacant houses are increasing’.
However, from the perspective of someone who actually buys and manages properties, the increase in vacant houses has both ‘risks’ and ‘opportunities’.
Point 1:
The reality that one in seven houses is vacant
The increase in vacant houses is bringing both ‘headwinds’ and ‘tailwinds’ to the investment market simultaneously.
According to the 2023 Housing and Land Survey by the Ministry of Internal Affairs and Communications, there are about 9 million vacant houses out of a total of about 65 million housing units.
The vacancy rate is 13.8%, the highest ever, meaning about one in seven houses is vacant.
The 10 million mark is no longer a distant figure.
The headwinds are clear.
As long as there is a surplus of housing, properties with weaker conditions will become harder to rent out.
On the other hand, it also means that there are more ‘properties that can be bought cheaply’ on the market.
Note that these 9 million units also include vacancies in rental housing currently being advertised.
If we narrow it down to vacant houses with no determined use, there are about 3.85 million.
The first step is not to judge by the numbers in the headlines alone, but to look at the contents separately.
Point 2:
The ‘polarization of vacant houses’ determined by whether they meet demand
The essence of the vacant house problem is not ‘quantity’ but ‘polarization’.
Properties that meet demand will continue to be valued even as the number of vacant houses increases.
Properties that do not meet demand will find neither buyers nor tenants and will deteriorate while left unmanaged.
This is what is known as slumification.
Even in Tokyo, if it is in an area near a station with high living convenience, tenants can be found even for old buildings.
On the other hand, even within the same ward, I see examples of properties with poor road access that cannot be rebuilt being left abandoned for many years.
It is not a simple story of ‘rural areas are dangerous, city centers are safe’.
What you need to look at is which side that property falls on.
And the perspective of ‘can it be moved to the demand side if work is done on it?’
Point 3:
Acquire cheaply, renovate, and rent out
This is the core of turning vacant houses into opportunities.
If the reason it does not meet demand is ‘age’ or ‘lack of management’, there is room to solve it through renovation.
Acquire it cheaper than the market price, do the necessary renovations, and put it up for rent.
While securing a yield, you can reduce the number of vacant houses in the area by one.
I believe this is an investment that can achieve both the resolution of social issues and profitability.
However, there are also points to be careful about.
Properties built under the old seismic standards (building confirmation before May 1981) may incur unexpected costs for seismic retrofitting.
It is not uncommon for hidden deterioration such as roof leaks or termites to be lurking.
Even if you can buy it cheaply, it is meaningless if renovation costs pile up.
Please be sure to check the building with an expert before purchasing and calculate whether the balance of payments works including renovation costs.
In summary.
The increase in vacant houses is a headwind, but at the same time,
it is also an opportunity to acquire properties at a low cost.
What is important is to look at the components of the numbers separately.
It is to determine whether the property is on the demand side.
And, it is to judge the balance of payments including renovation costs.
If you have the eye to see vacant houses not as a ‘problem’ but as
‘material’,
in this coming era,
a path to steady investment should open up.
Multiface Co., Ltd. Official Website
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