Starts Proceed is a J-REIT that invests in properties with high profitability in Tokyo metropolitan area major cities (Tokyo’s 23 wards, Yokohama City, Kawasaki City, Chiba City, Saitama City and the commuting area, which is roughly a 20km radius from these cities) as well as cabinet order designated cities and regional area major cities.
(1) Trends Regarding the Population and Number of Households
The national population peaked in December 2008 (Note 1), and it is forecasted that the population will gradually decline going forward (Note 2). On the other hand, it is projected that the population of the greater Tokyo area will continue to increase or remain at the same level into the near future (Note 3).
Moreover, the number of households nationally will peak around 2015 (Note 4) and is projected to gradually decrease thereafter. At the same time, this number is projected to peak in the greater Tokyo area around 2020 and is projected to remain at the same level thereafter (Note 5).
Therefore, Starts Proceed believes it can gain steady demand for rental housing by continuously investing in Tokyo metropolitan area major cities, cabinet order designated cities and regional area major cities.
| (Note 1) | “Intercensal Adjustment of Current Population Estimates (2005 - 2010),” Ministry of Internal Affairs and Communications (published January 2012) |
| (Note 2) | “Population Projections for Japan,” National Institute of Population and Social Security Research (published January 2012) |
| (Note 3) | “Population Projections by Prefecture,” National Institute of Population and Social Security Research (published May 2007) |
| (Note 4) | “Households Projections for Japan,” National Institute of Population and Social Security Research (published March 2008). |
| (Note 5) | “Household Projections for Japan by Prefectures,” National Institute of Population and Social Security Research (published December 2009) |
(2) Structural Changes in Household Composition
It is expected that the long-term trend for household composition will be an increase in the number of small households comprised of singles or couples. In particular, the increase in the number of households comprised of singles will be the greatest factor behind the increase in demand for rental housing.
Additionally, since around 1975 the trend has been for marriages to take place later in life (Note 1) and the average age nationally for the first marriage as of 2012 was 30.8 for men (increase of 0.1 years over the preceding year and 3.8 years compared to 1975) and 29.2 for women (increase of 0.2 years and 4.5 years, same). It is estimated that this tendency of marrying later in life converts into greater time living alone and an increase in singles.
Furthermore, despite the number of employed tending to be stagnant in recent years, the proportion of this number comprised of women has continued to increase over a long period, reaching the 40% level for the first time in 2001 and 42.8% in 2012 (Note 2). It is believed that this trend of increase in the number of women that are working combined with the tendency of marrying later in life will lead to steady demand for rental housing targeting single women.
| (Note 1) | “Annual Vital Statistics Report,” Ministry of Health, Labour and Welfare (published June 2012) |
| (Note 2) | “Labour Force Survey,” Ministry of Internal Affairs and Communications (published September 2012) |
(3) Employment and Household Income Trends
According to the “Statistical Survey of Actual Status for Salary in the Private Sector” published by the National Tax Agency annually, the ratio of salaried income individuals that are paid 7 million yen or less a year is increasing and rose from 84.9% in 2003 to 88.0% in 2012. Starts Proceed believes that the size of the rental housing market that enables this large group of workers earning less than 7 million yen annually to reside at appropriate rents for their income is large and that the demand is fundamentally strong.
(1) Trends in Rent Levels
According to the “National Office and Apartment Rent Index” (November 2013) published by the Japan Real Estate Institute, between 1995 and 2013 the rent levels nationally and in the greater Tokyo area for rental housing held steady when the housing rent indices are analyzed. Moreover, office rent levels analyzed through office rent indices over the same period showed an increase in recent years until their most recent dramatic drop. Thus office rents fluctuate much more severely than housing rents and tend to be impacted by societal conditions.
A comparison of rent levels nationally with the greater Tokyo area shows a large gap among office rents but a small gap for housing rents.
As a result of the above findings, Starts Proceed has concluded that housing rent levels will perform more steadily than office rent levels.
(2) National Average Rents for Rental Housing
According to the “2008 Housing and Land Survey (March 2010)” published by the Statistics Bureau of the Ministry of Internal Affairs and Communications, the average rent nationally for rented houses owned privately (non-wooden structures) was 65,099 yen. Starts Proceed gives maximum consideration to assess the rent levels of rental housing in each targeted investment area. Starts Proceed believes it can mitigate the risk of future rent fluctuations by investing in the average rental housing that has rents set at appropriate levels for their geographic area.
(3) The Starts Proceed Investment Corporation Portfolio
Taking the above rental housing market characteristics into consideration, Starts Proceed has constructed a portfolio in which 58.9% of the units targeting singles in rent range of 60,000 yen to 100,000 yen and 32.3% of the units targeting double income couples with no kids (DINKS) are in this rent range. Moreover, 37.8% of the units targeting families have rent of less than 120,000 yen and only 2.1% of the units targeting families have rents of 200,000 yen or more. We believe this is the foundation for stable operations over the medium to long term.
