Valuation of older detached houses for investment purposes in the modern era (3) The spread of the sharing economy and real estate valuation – The spread of the sharing economy

Article published on Vacant House Lab | Roopt (Makigumi)

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This presentation will explain the logic behind how the spread of the sharing economy will affect real estate prices, and will introduce specific sharing economy services.

Introduction

NoiHello everyone. I'm Noi, the host of this channel. In this video, we'll be talking to Mr. Ueda, President and CEO of GaiaX, about how to evaluate older detached houses as an investment in today's market.

Ueda: thank you.

Noi: In our last discussion, we've been discussing the current social situation in relation to creating future models, divided into four topics. The first is lifestyle and demographics, the second is workation and remote work, the third is the sharing economy, and the fourth is the evolution of technology. This time, we'll be discussing the second topic, workation and remote work. Mr. Ueda, thank you for joining us.

Ueda: thank you.

What kind of changes occurred?

UedaWe're currently discussing how to value real estate, and just as we're talking about how a declining population will affect valuations, we also need to consider the fact that we're now in an era where workcations and remote work are becoming more commonplace. I think remote work has really changed the norm, especially with the pandemic. By the way, do you, Noi, do remote work or workcations?

NoiYes. I mostly work remotely, and when I was a freshman in college, it was during the COVID-19 pandemic, so all my classes were conducted remotely.

UedaBy the way, what are the people working around Noi like?

NoiAlmost everyone is working remotely. I think there are very few people who have to come into the office every day from Monday to Friday.

UedaWhere do you all live?

NoiAmong the people around me, many still live with their parents, but some work from home more often, so they've moved to a slightly larger house. I myself was in a very small house at first, but I ended up spending a lot of time at home, so I moved to a slightly larger house. There are many people like that around me.

UedaMoving to a larger house might also mean moving a little further away from the city, don't you think?

Noi: That's right. Because the prices inevitably go up, some people are moving to a place a little further away, and also, with the increase in remote work, people are going out less, so some people might think it's okay to live a little further from the station.

Ueda: That's right. Thank you. At GaiaX, a lot of our members have left Tokyo. For example, some have moved to Fukuoka, which I've hardly ever been to, and others have moved to Nara. I myself have stayed in Hayama, and the Shonan area is really seeing an increase in population.

For example, many people move to Tokyo from university when they start working. Some even end up working while living at home. They have a decent amount of money, so they move to a place with good access to a train station near their home and suitable for leisure activities. For example, they might stay and live within Hiroshima Prefecture. One significant thing is that, given the improved communication infrastructure, these kinds of things have become possible in the post-COVID era.

Along with this, a variety of related businesses have also sprung up, too many to list, but for example, there is a service called "nursery school study abroad" run by a member of the Sharing Economy Association, similar to KitchHike. What this is, is a service where families live in the area for one or two weeks and have their children enrolled in a nursery school. This is more related to the sharing economy, which I will explain next, but what it means is that while local nursery schools are struggling with declining numbers of children, more and more areas are saying, "If there are migrants, we can accept them anytime."

In short, this means that areas outside of cities, particularly rural areas, which have experienced significant population decline, have an advantage. However, compared to the large wave of population decline, the number of people migrating to remote work is not that large. In fact, it's not the case that many people are moving to rural areas for remote work; rather, it seems that people are moving to certain areas, certain popular areas, simply because they can work remotely.

To give you an idea of where to move to, if you're in the Kanto area, Karuizawa, Hayama, and Shonan are among the most popular choices. But even if you're not in the Kanto area, for example, one of our employees who moved to Fukuoka chose Itoshima. Fukuoka is a strong contender within Kyushu, and within Fukuoka, there are two particularly strong locations: Itoshima and Fukutsu, located on the left and right sides of the coast. Surfing is popular there, there are stylish cafes, and so people are moving to these popular areas.

Areas that fail to gain popularity will decline. So, it's not that remote work will save rural areas because people will move there; rather, people will move to rural areas for remote work, but not all land will be saved. Only a select few successful areas will be saved. Land prices in Zushi and Hayama have risen considerably, but outside of these areas, if you ask whether land prices are strong enough to drive them up, I'd say they're not quite there yet. I think they'll either stay the same or maybe see a slight increase.

About the evaluation

Ueda: Now, I'd like to elaborate a bit more on that evaluation. Up until now, the focus has been heavily on whether it's in a city, whether it's near a train station, and whether it's in a densely populated area. In the case of Zushi and Hayama, Zushi Station was good because it was right next to the station. Hayama, for example, doesn't have a train station, so it might not have been highly rated, but actually, Hayama has beautiful beaches. In this era of remote work, having a beautiful beach or a good view of the sea becomes relatively more valuable than being near a train station.

Another important factor is the brand, and also the local community and the relationships between people. I went there, but the cafes weren't interesting at all, the businesses weren't interesting at all, and I just couldn't stand being surrounded by rice fields. I think it's more important to be in a place where there are lots of people who are creating fun businesses.

Here's another point: in order to continuously produce interesting people, having universities or similar facilities in the region ensures a relatively constant supply of talent. Oita Prefecture has Ritsumeikan University's APU, and the people who go there are starting various businesses around Oita, which is making things interesting. I think places like that also possess potential power.

Up until now, properties have been valued based on very static or unchanging factors such as past transaction prices and land value assessments. However, one wrong step can turn a property into a highly sought-after item. I want you to have the mindset to evaluate such properties and to consider how to properly assess them.

If a financial institution were to lend money to a cafe, they would ask questions like, "What kind of cafe is it? Is it a popular cafe?" For example, a while ago, there was a popular tapioca cafe, and they had a wide variety of drinks and lots of customers. They would then decide whether or not to lend money based on that. In reality, we real estate investors look at these kinds of things to decide whether or not to buy land. If it's a thriving area like that, we're willing to pay a high price for it. If it's on the decline, we go there, look at the atmosphere, and think, "This isn't good," and then we really don't buy it. I think it will be important in the future for decisions to be made in a way that is closer to the mindset of an investor.

Noi: Ms. Ueda, thank you for sharing your story. What kind of changes have you seen around Hayama, where you live, since the pandemic?

UedaActually, a lot of really interesting people from the Kanto region have gathered in the Hayama and Zushi area. There are about 100 people now, including people who originally ran businesses in the area and these interesting people who have moved here from Kanto, and they've pooled their money to build a bar in front of Zushi Station. Every night, only the 100 shareholders who invested can participate, and they're always exchanging information right in front of Zushi Station. There are lots of other projects starting up, and they're having conversations every day like, "Shall we build a sauna together?" or "Shall we do something about this co-working space?" It's really interesting.

NoiThat's really interesting. I wonder if those kinds of activities are really happening in various places now that workcations and remote work have become more widespread.

UedaWithout remote work, the number of properties would have continued to decline, but as a result, I think there are dozens of places where this trend is reversing, though not necessarily 100 or 200.

NoiThank you very much. This time, we discussed workation and remote work, taking into account the current social situation, which will be important when creating future models. In the next video, Ms. Ueda will continue to talk about the sharing economy. Please be sure to watch the next video as well. Thank you for watching.

Ueda: thank you very much.

source: Vacant House Lab