Kansai rent remains stable despite drop in land prices

by Gary Tegler

KYOTO — Despite a sharp drop in land prices in the Kansai region, rents for residential properties have failed to come down to comparable levels, a trend many experts attribute to a mix of regional and traditional factors.

A real estate agency near Kyoto University in Kamigyo Ward displays advertisements for rental apartments.

According to a survey conducted by Chintai Jutaku News Co., publisher of one of Japan’s pioneer real estate magazines, residential land prices in Osaka, Kyoto and Kobe dropped an average of 56 percent over the last 10 years.

However, staffers at many real estate firms say that rents have remained stable, with only rural areas and student housing marking a slight decrease.

The study compares rents for 2LDK (living, dining and kitchen) apartments built within the past five years in seven major cities.

The highest rents, as might be expected, are paid in Tokyo, where the average is around 150,000 yen a month. Yokohama comes second at just over 115,000 yen and Osaka ranks third with an average rent of 107,000 yen.

However, Osaka tops the list in the amount of “reikin,” gift money, and “shikikin,” cleaning deposit, that must be paid before moving into a house or apartment.

In Osaka, such fees are thrown into a package known locally as “hoshokin.” The average hoshokin is 575,000 yen for a 2LDK apartment with a rent of 100,000 yen, according to the Chintai Jyutaku News survey.

This is equal to two months’ rent for the cleaning deposit, some of which will be returned, and 3.75 months worth of rent that does not come back, often called “kaiyakubiki” or “shikibiki.”

“During the bubble economy years (of the late 1980s), rents in Osaka were very low compared with the value of land,” Noriko Okada, a spokeswoman at Chintai Jutaku News said.

“Even though land prices have fallen, and with them the amount of tax that must be paid on the land, it is difficult to get landlords to lower rents as they have grown accustomed to receiving a certain amount of income. However, in the current economic slowdown, it is also difficult for landlords to raise rents.”

Another factor that has helped keep rents from declining is that since the end of World War II, laws governing real estate and the leasing of property have favored the renter, according to a representative for the All Japan Real Estate Federation.

The traditional two-year contract and the difficulty in getting tenants to move out after it expires has spawned another practice called the collection of “koshinryo,” meaning renewal money. Each time a leasing contract is renewed, a sum usually equivalent to one month’s rent must be handed over to the landlord.

“Once a landlord rents to a tenant, especially in the case of a two-year contract, it is very difficult to ask the tenant to leave,” the federation representative said.

“However, this situation has been changing. In March last year, new legislation took effect that allows landlords to make contracts spanning three to five years that need not be renewed at the end of the term.”

Though existing in other parts of the country, renewal money is invoked primarily in Tokyo and Kyoto, according to real estate agents.

There may be a historical basis behind the reason the practice persists in Kyoto, according to Yukinori Fujioka of local real estate agent Daikoku Ltd.

“Relations between landlords and tenants are more personal in Kyoto,” Fujioka explained. “(This closeness) is due to the fact that Kyoto was the nation’s capital for so long and most likely dates back to the Edo Period, when the merchant classes began to come into their own.

“There are many instances for both apartments and houses where written contracts do not exist. The arrangement is entirely verbal.”

There are no laws governing the practice of renewal fees, or reikin for that matter, which makes it a gray area, legally speaking. Landlords are free to set amounts themselves and are free to add clauses to contracts, sometimes handwritten, requiring a contract renewal fee be paid.

“The only instance where koshinryo, as well as gift money, is expressly banned is in public housing or where an apartment building is built with loans from the government,” said Kozo Nagano, an attorney with the Oike Sogo Law Office in Kyoto who specializes in real estate cases.

But despite the potential for abuse, Nagano said he has encountered no cases where renters have tried to sue landlords over matters related to renewal fees or gift money.

“Most of the cases that reach arbitration have to do with the nonreturn of the cleaning deposit,” he said, explaining that some landlords are not aware that it is illegal to hold on to the full amount of the deposit.

The high expense of moving into an apartment or house in the Kansai region has gradually brought into existence dozens of small real estate agencies that advertise places where no reikin, or koshinryo in the case of Kyoto, are charged.

These are usually one- or two-room apartments in older buildings for students or singles who will be staying in the region for only a few years.

These apartments rent for between 20,000 yen and 40,000 yen a month and require only two months cleaning deposit.

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