AI offers hope for Japan's empty-home epidemic
New appraisal services bring ease and transparency to pricing
TOKYO -- Just as financial technology, or fintech, is adding new depth to banking and financial services, real estate technology -- or retech -- may help rejuvenate Japan's long-stagnant used-housing market, which is awash in vacant homes.
Accurately assessing the value of a secondhand home can be a nightmare in Japan. This job is typically handled by appraisal companies that often use complicated or opaque methods based on data that only they hold, resulting in prices that are inconsistent or which do not reflect the market reality.
Retech services aim to make the process easier and more transparent. They do this by using powerful software to crunch huge amounts of data to estimate the current and future prices of secondhand homes.
"We are seeing the emergence of new services that combine artificial intelligence and big data analysis," said Tomohiko Taniyama of Nomura Research Institute. "Customers can now easily and inexpensively access information that in the past they otherwise would have not known unless they went to an appraisal company."
This access to better information is activating the housing market, where prices are being weighed down by the growing number of vacancies.
Spurred into action
According to NRI, there are 50 to 60 retech ventures in Japan.
Among that number is Tokyo-based Collabit, whose CEO, Tsuyoshi Asami, founded the company because of his own frustrating experience in trying to sell his home.
Five years ago, Asami bought a house in suburban Yokohama near the company he worked for at the time for 40.8 million yen ($368,000). Later, however, the company was acquired by another business and his office was moved to central Tokyo.
Although Asami wanted to sell his home right away, he had no idea how much it was worth and started to worry that he would be forced to sell it for half the price he paid. When he tried to get a clear picture of the home's real value, he discovered that is was actually hard to do. He began to wonder why that was.
Asami created his own appraisal method, which estimates housing prices in neighborhood units -- called chome -- using data on past transactions and AI.
He tested the system using his own home at the end of last year and found that he could ask for 39.9 million yen, higher than he was expecting. Last month, Asami sold it for 39.8 million yen.
Another service, offered by Tokyo-based Mansion Market, estimates condo prices nationwide. About 160,000 people use the service each month.
According to the Ministry of Land, Infrastructure, Transport and Tourism, some 60.6 million housing units worth 350 trillion yen are on the market in Japan. Of that number, 90% are newly built.
The number of secondhand units is so small in part because of confusion over pricing. The lack of a centralized system for tracking changes in housing prices over the years serves to slow the market down.
It is also fueling another problem: the growing number of vacant homes. The number of empty secondhand homes in Japan is estimated at over 8.2 million units, or more than 10% of all residences. One forecast sees the ratio rising to over 30% in 2030.
A senior official at the land ministry expressed concern that the growing number of vacant homes "will further push down property prices."
Tokyo-based renovation company Renoveru sees an opportunity here. By reaching out through Facebook and other social media platforms, it looks for clients interested in renovating and buying vacant condo units built more than 20 years ago.
A typical project will see the company spend 9 million yen renovating a 30 million yen property in Tokyo. The clients choose what kind of changes they would like.
It has already renovated some 1,200 units for its customers, whose average age is 37.
Renoveru President Tomohiro Yamashita said the service "boosts the value of being secondhand."
The efforts of companies like Collabit and Renoveru offer hope for Japan's real estate market, where prices have been trending lower for 15 years.
More broadly, they could also combat deflation. Housing expenses, including rent, constitute 20% of the consumer price index. This category is depressing the CPI, with the housing segment declining 0.2% on the year in June.