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THE PACIFIC: SPOTLIGHT ON HIGH-GROWTH COMPANIES : Housing Rebound May Help Japanese Recovery : Real estate: Home builders are enjoying a profit after dismal 'post-bubble' years.


TOKYO — Mitsuo Kon and his wife have talked of buying a new home for the past few years. This month, they decided the time had come to make a move.

They found a "bargain"--a 1,000-square-foot, $567,000 condominium under construction 45 minutes by train from downtown Tokyo.

"Prices are cheaper than two or three years ago. It looks like it's affordable for us," Kon, 56, said after filing an application to buy the unit. The couple were especially pleased by the overall design of the three-bedroom place, which will have bigger windows, higher ceilings and larger rooms than the typical tiny Japanese apartment.

"The quality of condominiums is getting better," Kon said. "Before in Tokyo, even if you paid one 100 million yen ($1.01 million), you couldn't get something like this."

Mitsuo and Seiko Kon are participants in--and beneficiaries of--a resurgence in Japan's housing industry. Fueled by a reduction in land and construction costs, lower interest rates and tax law changes, the housing rebound is one reason for hopes of a consumer-led expansion out of recession.

Japan's construction industry still faces hard times overall, but companies active in the housing market are enjoying a profit rebound after the dismal "post-bubble" years of 1991 to 1993. Housing construction-related firms were prominent in a survey completed for The Times of Japan's fastest-growing public companies.

"The amount of profit on each unit has dropped some" compared to a few years ago, said Noboru Wada, manager of the real estate information division of Jutaku-Joho magazine, a publication for prospective home buyers and renters. "But since there's more condominium construction, overall profits are up for the companies building them."

In the mid-1980s, a typical 700-square-foot three-bedroom condominium located an hour by train from downtown Tokyo sold for about $303,000 at today's exchange rates, Wada said. The price soared to $606,000 by 1991, and has now fallen back to the range of $404,000 to $450,000, he said. Total sales have picked up dramatically, but competition between developers remains fierce.

"It's a bit easier to sell now than it was a few years ago, but it's still not really easy," said Hitoshi Hirose, a manager in the real estate development department of Tobu Railway Co. Ltd., builder of the complex where Kon is buying.

Kon, a government employee, and his wife, a nurse, can afford a new condominium partly because they already own an 807-square-foot place they bought 10 years ago, before the late-1980s surge in real estate prices and subsequent collapse. "I think we can sell it for a bit more than we paid for it," Kon said.

But people who bought at the peak of the overheated bubble years have seen their equity disappear, leaving them trapped in their current homes and generally unable to take advantage of lower prices to move into bigger places. The fall in housing values, which began three years ago, was also a shock to developers.

Once Japan entered recession, condominium sales ground to a halt, Hirose explained.

But in July, new condominiums put onto the market in the Tokyo area surpassed the 10,000-unit mark for the first time ever, according to the Real Estate Economy Institute. The private research firm projects the total for the year will be about 80,000 units, far exceeding the previous Tokyo-area annual record of 54,700 units set in 1978.

Nearly 90% of the new condominiums coming onto the market are selling within a month.

Total housing starts nationwide, including rental apartments, condominiums and single-family homes, are now running at an annualized rate of 1.6 million. This compares with total starts of 1.51 million last year, itself a sharp improvement over 1992.

As Japan slowly emerges from its worst post-World War II recession, analysts say that the housing market's strength is a factor contributing to hope for steady consumer-led expansion.

"Housing construction promotes the purchase of consumer durables," Wada noted. "And it's said that there's a broad foundation that supports real estate development. Lumber, steel and concrete are needed. Then there's the effect on purchases of furniture, curtains and little things like that."

An important factor contributing to the condominium boom is a 1991 tax law revision that boosted property taxes by 50 times on urban-area agricultural land rezoned for housing development. The effect of the changes was to increase the value of the land, but also to raise taxes so much that owners were almost forced to develop it rather than keep it in rice fields.

Some owners have chosen to retain their land by building rental units rather than condominiums.

Daito Trust Construction Co. Ltd. is one firm that has enjoyed dramatic growth from building rental units on land put into development as a result of the 1991 tax law. But the company has recently seen the number of these special projects fade sharply.

While many prospective buyers still hope for a further drop in prices, developers are afraid that oversupply may soon wipe out the profitability of condominium construction.

Nichiei Construction has seen profits go up sharply in the past two years, but still views the overall environment as rather difficult.

"After the bubble burst, land prices came down, so those who couldn't afford condominiums are now capable of buying them," said Nichiei spokesman Masataka Sato. "But on the other hand, there now is an oversupply of condominiums, and many customers are waiting for a further decline in prices."

Times researchers Chiaki Kitada and Megumi Shimizu in Tokyo contributed to this article.

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