* People rushing to buy homes before sales tax hike
* Many buyers fear mortgages will rise later
* Housing boom may peak in Q3, but still a success for Abe
By Stanley White and Taiga Uranaka
TOKYO, July 19 "Abenomics" has convinced Ayako
Onishi and her husband that now is the time to buy their first
The couple, who had their first child last year and are
looking to move into Tokyo from the suburbs, are part of a
rapidly growing number of people looking to buy houses and
apartments in the wake of aggressive economic policies pushed by
Prime Minister Shinzo Abe, who is set to cement his hold on
power with a big upper house election victory this weekend.
However, the buying burst may be temporary as many
purchasers are jumping in to the long-moribund residential
property market to avoid paying more later in taxes and interest
The risk is that after a planned increase in Japan's
national sales tax takes place in April and rising interest
rates push mortgage rates higher, buyers' enthusiasm will wane.
That will add to pressure on Abe to follow up his economic
stimulus measures with economic reforms that will raise Japan's
growth rate longer term.
Still, the pick up in the property market is an early
victory for Abe since he took power in December. His brand of
economic policies - dubbed by the media as Abenomics - has seen
investor and consumer sentiment improve.
"The showrooms were crowded. We tried to make a reservation
for a Friday, but we had to wait a week," said Onishi, 35. "The
sales tax and mortgage rates are the top reasons we are looking
for a place now."
Abe must decide in coming months whether to proceed with a
planned doubling of the sales tax, starting with an increase in
April 2014 to 8 percent from 5 percent. The hike is central to
the government's plans to rein in Japan's massive public debt,
which is more than twice the size of the economy.
The rise in long-term interest rates, by contrast, is an
unintended consequence of massive monetary easing - which was
meant to push rates down in the near term while pulling Japan
out of 15 years of deflation.
Property developers in greater Tokyo sold 81.6 percent of
new apartments they brought to market in June, the Real Estate
Economic Institute Co, an industry group, says. Many buyers in
Japan and other Asian countries prefer to buy new homes.
The rise was 2.9 percentage points above a year earlier, the
biggest in three months. In June, 16 developments with a total
of 409 apartments sold out on the first day. Sales rates in
areas of western Japan, including Osaka and Kyoto, were a bit
lower but still "booming," the institute said.
This boom could peak by the end of September because buyers
of homes under construction need to make sure their contracts
close before the April 2014 tax hike. If they buy after
September, they might not be able to close their deals before
the tax goes up.
"Housing demand will drop after the first tax hike, but the
pullback won't be nearly as bad as it was the last time the
government raised the sales tax, in 1997," said Yoshiki Shinke,
chief economist at Dai-Ichi Life Research Institute in Tokyo.
That is partly because consumer spending will likely pick up
before the tax is raised again in 2015.
Unlike the tax increase, the rise in interest rates was not
The Bank of Japan's aggressive monetary policy aimed to
crush bond yields and so spur economic activity, through the
massive government-debt purchases it announced in April.
Instead, yields are higher as the bond market struggles to
adjust to the BOJ as the dominant player and as some investors
start to price in inflation. As a result, mortgage rates have
Sumitomo Mitsui Banking Corp and the Bank of
Tokyo-Mitsubishi UFJ have raised the 10-year interest rate for
their most-qualified borrowers, a benchmark used for setting
mortgage rates, by 35 basis points to 1.70 percent. Mizuho Bank
has raised its rate by 30 basis points to 1.65 percent.
Borrowing rates are rising enough to make people feel they
need to take out a mortgage now but they have not risen nearly
enough to harm the rest of the economy, bankers suggest.
"So far we are not hearing any signs of the housing market
losing steam," said Yasuhiro Morito, a consumer-loan banker at
Resona Bank, the core unit of Resona Holdings Inc.
The number of Resona's new housing-loan contracts jumped 20
percent in the second quarter from a year earlier, while
applications for pre-loan screening were up around 25 percent,
Japan's overall bank lending rose 1.9 percent in June from a
year earlier, the fastest pace in four years, BOJ data shows.
Demand is being helped by banks busily promoting fixed-rate
mortgages on TV and radio. Magazines are bursting with advice on
how to take out your first mortgage, whether to refinance your
existing home loan and how to take advantage of new tax breaks.
Japan was the fastest-growing economy among the Group of
Seven industrial powers in the first quarter, thanks to Abe's
stimulus spending, a recovery in exports on a weaker yen and a
pickup in consumer spending. The unemployment rate is falling,
labour demand is at its strongest in five years and there are
tentative signs some firms are willing to increase bonuses.
And yet, many of Japan's home-hunters are cautious about the
economy because their base pay has not risen. A rise in base
pay, which data shows has not risen since 2005, will be critical
to the success of Abe's policies otherwise the inflation he
hopes to generate could mean that real wages fall.
In Osaka, Akira Yamahara, 47, said he is rushing to buy a
house before the sales tax goes up, but he expressed caution.
"Abe's policies haven't trickled down to other parts of the
economy," he said after visiting a showroom to look at floor
plans. "I personally don't feel like the economy is recovering."