by Noriyuki Morimoto
Housing was an important sector supporting Japan’s period of high economic growth. Against the backdrop of a rapid increase in individual income and mass consumption, the market was formed on the assumption that housing was the ultimate high-value consumer item. Mortgage loans contributed significantly to this economic growth by supporting the supply of houses. However, as Japan shifted to a hyper-mature society, the aging and abandonment of the huge number of houses built during the high-growth period became a serious social problem, and old-fashioned mortgage loans are no longer serving any social purpose.
Housing as a durable consumer good is not compatible with a super-aging society. For elderly households living on pensions, houses built for families with children are too large. The assumption that houses will be rebuilt when they age and begin to cost more to repair has collapsed.
From a human-centered perspective and social standpoint, it is grossly inefficient to rebuild houses according to changes in family structure. However, it used to be economically effective, in the sense that wasteful consumption drove economic growth. In a mature economy, there is no choice but to eliminate waste and improve efficiency. Focusing on houses, the key is to establish a supply of semi-permanent, asset-based housing that can be used in accordance with demographic trends, so that people can change their residences according to their family structure.
In other words, houses should not be treated as a consumer good, being rebuilt as they age, but as an asset maintained through renovation and repair. From the aspect of mortgages, the current situation is that they have become de facto consumer loans based on the assumption that the asset value of houses will be eliminated. Rather, they should be converted into asset-backed loans based on the assumption that the asset value will be maintained.
[Category /Deconstruction of Finance]
Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.