(a) Structural Changes in the Land and Property Market and their Influence on Land Transactions

It has been pointed out that the property market (including the land market) in Japan suffers from low transparency. One of the reasons for this is that it is difficult to judge the value of property from its appearance. For example, from the general appearance of the land (i.e. without geological and historical information) the ground itself and levels of contamination can not be understood. Also, without such information, the buildings on the land are not easily understood by the general public, including their general structure; earthquake proof ratings, strength, endurance and insulation properties. Locations are relatively easy to understand, but in order to understand accurately the value of land itself, it is necessary to visit the surrounding area several times and to recognize this value by spending time there. Also, the value of land will change in accordance with economic circumstances and its location in relation to urban areas. 
Site conditions, such as figures and site areas, are difficult to grasp accurately if cadastral surveys are not conducted. Also, in Japan, the level of property prices is high and the interests of related individuals are extensive, accordingly people in Japan have not been positive when it comes to disclosing information about property. 
In such an environment the general public tends to be prudent about participating in the market and naturally the number of players in the market is limited. 
The above situation did not emerge before the busting of the bubble because asset values, even for properties which were less usable, had been increasing and the number of people who suffered losses from land transactions was few. 
However, today land prices are declining and the market has changed to the point where values are now determined according to the utility of the property within the land market. In this type of market utilitization value is important, especially for those purchasers who use land as a "resource". Profitability as an "asset" is also important for those who purchase land as either an "asset" or as a residential property with the intention of disposing of it when they relocate. Accordingly, when information that is used for assessing property values is unevenly distributed, and the general public cannot easily access the necessary information, there tends to be a more prudent attitude among citizens in participating in land transactions.
In order to stimulate transactions in markets that are based on actual demand, it is necessary to enhance market transparency.

Column: Transparency in Asian Property Markets
Transparency in the property market also influences substantially the international competitiveness of Japanese cities. One factor affecting the international competitiveness of cities in a global marketplace is where the big corporations locate their headquarters. Transparency in the property markets is one of the important factors foreign affiliated corporations consider when they open overseas offices and conduct property investments.  For example, if we look at the disclosure of land-related information in Hong Kong and Singapore (both potential information and financial bases in Asia) transaction price information in both cities is registered at land registries, and is open to the public. Based on this information, government agencies also provide related statistical data. In Hong Kong, private firms collate transaction price information and provide this assembled information via the internet etc in a format that is easily understood by the general public. Foreign investors regard market transparency in Hong Kong and Singapore as high, making it easy for them to penetrate into these markets - property information is provided in English and their registration systems are well developed along with those for cadastral information. In this environment it is easy (both for the general public and foreign investors) to obtain the information necessary for residential relocation and property investment generally.  Looking at the background to these structures, we can see that the countries and regions concerned comprise of city-state governments where new measures are easily exercised in flexible and quick ways, and the promotion of foreign investment is strongly recognized as a major policy for sustaining their economies.  It is generally difficult to compare these countries with Japan because the economic scale and volume of property stocks, and ways of thinking about ownership of property, are different. But foreign investors say that in Japan it is rather difficult to obtain property-related information, that cadastral information recording is not well developed and that it takes time to obtain certificates of boundary. It is pointed out the necessity for a suitable response in Japan, taking into account the competition that exists amongst the cities in Asia.
<Hong Kong>	<Singapore>

(b) Delays in Market Adjustments

"Prices" are the accumulated result of valuations in the market; including the value of the property, conditions at the time of transaction and individual circumstances. 
During the bubble period, valuations in the market were far removed from actual conditions, and there was excessive construction of small and medium scale office buildings and resort developments in less accessible areas. One of the reasons why such conditions prevailed was that information concerning demand/supply trends at the place of transactions were not appropriately provided to the financial institutions who assess project loans and to the managers of developers. 
In order that prices reflect property values fairly, not only is detailed information about the subject property required, but also transaction information, indicating demand/supply conditions in the market, should be made available to everyone. 
Fairer prices will be formulated by creating circumstances where anyone can verify judgments provided by the market players, based on information that is available to everyone. 
In our "Corporate Business Survey of Conditions of Land Ownership and Use", we asked about price information that was collated for the purpose of deliberations on land disposal and land purchase. We found in the "asking prices in surrounding areas from brokers" were the highest, suggesting that few corporations grasp market prices by themselves. (Chart 1-2-14)

Also, to address cases where property transactions are not being conducted smoothly due to sharp rises in land prices, or where adjustments are required to avoid land-use confusion, we need to introduce administrative measures in such areas as the tax system, monetary policy and land-use regulations. In the current situation, however, where our systems are not sufficiently developed to grasp land-transaction conditions accurately and quickly, it is a matter of some concern that such measures are not able to be exercised quickly or adequately. From this perspective, as well it is important to develop accurate information systems that clarify transaction conditions.

Chart 1-2-14 (1)	Price Information Collected when Corporations Purchase or Examine the Purchase of Land

Chart 1-2-14 (2)	Price Information Collected when Corporations Dispose or Examine the Disposal of Land

2. The Presentation of Land Related Information and its Effects

In property markets where actual demand is the basis, it is important that various, easily understood items of information be quickly obtainable by anyone in order to promote adequate functioning of the market mechanism and to stimulate the market. 
In particular, because price measures the worth of various features and the overall value of the subject property, information on prices is regarded as the most important factor in transactions. The "Survey concerning Basic Information for Land Transactions¹" conducted by Ministry of Land, Infrastructure and Transport, shows that 80% of both purchasers and sellers consider it important to understand market-rates; and 80% of people feel they need actual transaction prices. (Chart 1-2-15) We will consider the benefits of land information presentation below.

(a) The Effect of Providing Information Concerning Transaction Prices

i)      Improvement of Transparency in the Residential Property Market In the market for residential properties and land for residential use (i.e. the residential property market), the players are the general public most of whom are not accustomed to property transactions. If information on the many transaction prices that have occurred in the past is available when members of the general public buy or sell property, that information will be an effective tool with which to judge what valuation to place on the subject property in the market, and whether that price is fair or not. 
Price setting for both sellers and purchasers will be easier when information about the many transactions of the past is provided to the market. If transaction prices and price-setting factors such as the quality of the property and the conditions applying to each transaction are understood, purchasers can effectively identify fair priced properties which meet their needs. 
Also, potential purchasers, who may have images of property transactions being "confusing" or "difficult to conduct", will be able to conduct property transactions with a sense of security. With this greater sense of security regarding transactions, latent demand will be stimulated; and will include, for example, the purchase and repurchase of residential properties based on the life stage of the purchaser, the purchase of villas and the reuse of traditional houses. Also, if residential relocation is activated, we will see an increasing number of situations where members of the general public also become sellers. The disposal of property by members of the general public is considered to be more difficult than purchasing property. This is because, for purchasers, housing-related information is relatively well provided. 
In the "Survey of Basic Information on Land Transactions" the number of requirements relating to transaction prices is higher for sellers than it is for purchasers. (Chart 1-2-16)

Chart 1-2-16 (1)	Information which attached importance to when purchasing
Chart 1-2-16 (2)	Information which attached importance to when disposing

Used residential properties vary in terms of their age and specifications, and the prices of basically similar properties can vary according to their condition and level of maintenance. For those reasons, when it comes to enabling the players to conduct rational assessments, information of previous transaction prices, management and maintenance-history is more necessary for used properties than it is for newly built properties. When transaction-price information is provided, it is easy to understand market conditions and pricing based on the advice of experts and by analyzing this information themselves. Under conditions where not only the parties to the transaction but anyone can access the information concerned at anytime, the number of players involved in such transactions will increase along with the number of market participants; and we can expect an expansion in property liquidation and market size. (ref. In Maryland USA, transaction price information is disclosed over the internet free of charge, and they say this service is attracting 600,000 hits per day) 
For transactions relating to residential properties, mortgages are often provided. Because the property market these days contains a high risk of property price fluctuation, accurate risk evaluation is difficult, and collateral value assessments tend to be lower. When more precise risk evaluation becomes available, with the collation of transaction price information, the promotion of smoother residential property finance will also become possible, along with further stimulation of the market.

ii)      Development of New Property-Related Information Business Because property transactions are sometimes conducted under particular conditions, such as hasty selling or hasty purchase, and because the characteristics of each property are different, a specialized knowledge of pricing is required. 
In the "Survey of Basic Information on Land Transactions", 80% of both purchasers and sellers said they require transaction price information. On the other hand, when considering the purchase or sale of individual residential properties, 60% of sellers and 30% of purchasers also consider it necessary to have actual transaction price information about nearby properties as well (chart 1-2-16). Although the fact that such information is difficult to acquire influences the end-result, it is also difficult for the general public to make use of raw transaction price information, even when it is available and therefore the presentation of easily explained information is required. 
In overseas countries, consulting businesses provide advice and processed information is also available. As for Japan, by providing transaction price information to the market a new type of business activity will arise in the area of providing more reliable data based on more accurate and broader-based information, especially for clients who attach importance to profitability and convenience. And businesses which analyze this information, and provide it in an easily understood format will expand. On the other hand, such businesses will not be easy to establish without the information concerned.

²Escrow agents are intermediaries who play a role in land transactions by collecting payments from purchasers and essential documents for recording (such as title deeds) from sellers. Using escrow agents is common on the West Coast but not so common on the East Coast. Title insurance companies often act as escrow agents.

iii)      The Improvement of Transparency in the Income Producing Property Market

In that sector of the income producing property market where specialized investors participate, the participants currently collect information through their own endeavors. However, the level of market transparency in this sector is considered to be insufficient compared with the property markets of foreign countries and with financial markets such as the stock market. 
In Japan, apart from the properties invested in by J-Reit, where it is said that information disclosure is conducted at similar levels to that of foreign countries, information disclosure on income producing properties has not progressed, and this makes it difficult to prepare a reliable property investment index³. When the provision and presentation of related information is developed, standards that enable comparisons by investors will be provided, and new investment money will be introduced, thus stimulating the market.

³A "Property Investment Index" is an index which shows the profitability of a property. It is used as a tool in order to consider property investment rationally, and in assessing objective results. In Europe and USA, private corporations and institutions prepare and present the Index, while in Japan the Index is also prepared and presented by several private corporations.

(b) The Enforcement of Market Mechanisms by Providing Various Types of Information

i)      Acceleration of New Product Development

As we have seen in (1), the presentation of information will not only improve market transparency, but will also have an effect in terms of accelerating new product development and spurring demand. 
Generally, when purchasers have difficulty obtaining information regarding a product, potential demand for that product will not be fully realized. It is difficult for sellers to develop products precisely reflecting the demands of purchasers and, as a result, the options available to purchasers will be limited. Sellers try to maximize their profit when they sell a product based on their selling points. In such markets, the market size will naturally be limited. There are cases, however, where the potential buyer's needs are also recognized and actual demand is produced as a result of product development conducted from the viewpoint of the purchaser. Mobile phones with their various functions, and consumer electronics incorporating functions that develop the "ease of use" concept, are examples of this. 
When sufficient information is provided in the land and property market, product development which meets the needs of consumers will be possible, and this is expected to stimulate new demand. For example, in response to price-fluctuation risk in the residential property market, such new products as insurance covering any decline in property values - as developed in Europe and the USA - will also lead to a stimulation of economic activity in other sectors.

ii)      Accelerating the Accumulation of Good Quality Stock

Once the general public and investors can acquire more information, and select property after taking into account its future profitability and convenience, this will create an environment in which properties of good quality will be fairly valued, and in the long run this will encourage the accumulation of desirable stock. Also, by quickly understanding the needs of the market, property developers will be able to promote development based on actual needs and, as a result, the development of a better urban structure will be accelerated.

3. Issues Affecting the Development of Land Information

(a) The Necessity of Developing Transaction Price Information

In Japan, transaction price information is not provided to citizens by a public organization, even though standard price information is published by the central and prefectural governments. As we have seen, in a land and property market that is mainly established on the basis of actual demand, the current situation is seems to be an obstacle to any revitalization of property transactions. 
Because land is a precious and limited resource of the people, and an essential foundation for various activities, any transaction involving land needs to take account of public welfare factors. In order to allow the market mechanism to function effectively, it is important to develop publicly a market infrastructure comprising market rules and an information environment that addresses changes in the market structure, in technological development such as the diffusion of the internet, in the emergence of new products such as real property securitization products and socio-economic trends such as the emergence of new participants off-shore affiliated funds and individual investors. Again, looking to the future, in order to maintain our competitive strength vis-a-vis other cities in Asia, it is a pressing matter that we develop an environment in the land and property market similar to that which applies in other countries.

COLUMN:	The Development and Presentation of Transaction Price Information in Other Countries
The most advanced countries in the world, when it comes to the presentation of transaction price information, are the USA and the UK. In the USA, transaction price information is available in 36 states. In Maryland State, transaction price and other information is displayed over the internet free of charge; and it is said that the relevant website receives 600 thousand hits per day. (Chart 1-2-17). In the England and Wales in the UK, after widespread consultation aimed at "stimulating the property market", the recording of price-paid information at land registries, which was halted for a period, has been restarted, and from March this year both countries started an information service via the internet with access from all over the world. In France as well, transaction price information is registered at land registries. However partly because of delays in computerization, this information has not always been easy to use, so the Chamber of Notaries Public has developed a cumulative database of transaction information and made this available for use. In Germany, transaction price information is not disclosed, but price information must by law be reported to "the Committee of Valuation Appraisers", a public organization. Transaction prices are then compiled into a database of "purchase price data", and based on this ground price maps and market reports, etc. are prepared and provided to the general public. But the German market has been criticized by the UK and US banks and others as not being transparent, so they are now considering the disclosure of transaction price information. In Berlin City, data on individual transactions is provided to experts such as property appraisers after masking-out specific data that is any more detailed than the street name. However, Germany is considering the disclosure of transaction price information. In Austria, neighboring on Germany, a similar system operates to that in Germany, whereby transaction price information is not disclosed, but information linked with the cadastral and registration databases, together with information collated and aggregated from such data, can be accessed and used via the internet.  In Asia and Oceania, transaction price information is open to the public in Hong Kong, Singapore and Australia. In Hong Kong, such information is obtainable online via a special line from the Land Registry. Currently, access to this online service is limited to between 14:00 hrs and 16:00 hrs, but from January 2004 they plan to transfer the current system to a new one, and achieve 24 hour access via the internet. Also, the registration system will soon be transferred from the current format (which is enforceable to the third parties) to the Government insured registration system (i.e. the Torrens System)  In Singapore, as a response to the property bubble that occurred in the first half of 1990s, the presentation of information is positively promoted in order to make the market more transparent. Since the middle of 1960's, when transaction prices were registered at the land registry, price information has been open to the public. From 1998, they started a computerized system of registration, and by the year 2000 all registered information was maintained in this computerized system. Together with these developments, the information concerned (registered information, cadastral information, etc.) is now provided in a one-stop shop via the internet. Singapore completed the change over to the Torrens System in 2001 (Chart 1-2-18).   Chart 1-2-17    Website of the Maryland Department of Assessment and Taxation     Chart 1-2-18 The Development and Presentation of Transaction Price Information in Other Countries   　 Disclosure Presentation via Internet USA (Maryland State) ○ ○ England ○ ○ France ○ × Germany △（※） △（※） Hong Kong ○ planed from Jan 2004 Singapore ○ ○ Australia ○ ○   Source: Survey by Ministry of Land, Infrastructure and Transport (*) In Germany, processed information is available. In some German states, information is provided via the Internet. In Berlin, detailed data, such as street number, is masked and then provided to experts (to be considered for presentation to the general public). Processed information is presented via the Internet.

(b) The National Mood Regarding Information Development and Presentation

Regarding the disclosure of transaction-price information, our examination so far of the issues surrounding the presentation of information and its disclosure has been conducted because it is considered important to wipe out the non-transparency and uncertainty in property transactions, and to establish a property and property securitization market that investors can trust, and that promotes real property liquidation. 
According to the "Survey of Basic Information on Land Transactions", 80% of both sellers and purchasers were positive about providing information in response to requests from the Central Government, etc. Moreover, nearly 50% said they are happy to cooperate unconditionally. (Chart 1-2-19). The conditions mentioned by others who said "We are happy to cooperate under certain conditions" were as follows: that "no information be provided that identifies the subject property", that the information be "anonymous", and that it be for "official use only, such as for land-price publications" each of which represents more than 50% response rate (to multiple answer questions). (Chart 1-2-20). 
Taking such conditions into account, it is necessary to discuss ways of presenting transaction price information in the near future.

Chart 1-2-19	Intentions Regarding Cooperation with the Presentation of Information in Response to Requests from the Government and Others

Chart 1-2-20	Conditions for Cooperation in the Presentation of Information (multiple answers)

(c) Usefulness of Standard Price Information on Land

It has been pointed out that published land prices etc. (currently presented as "published land prices" and "standard land price surveys of prefectural governments") are not sufficient in terms of presentation of information to the market. This is particularly so in the current situation where "individualization of land prices" is proceeding, and where important information on actual transaction prices is unevenly distributed amongst the players. However, this does not deny the important function of published land prices; which perform "the role of providing an index to normal land transaction prices". 
The published land prices show the normal price in terms of standardized land (without buildings and liens) for the purpose of providing a general index on land transactions. By comparing the subject-land that is to be evaluated with the published land sites, rough prices are estimated. 
Because transaction prices reflect the circumstances of each transaction and the characteristics of each property it is difficult to analyze and judge each transaction price in isolation, even where the disclosure of transaction price information is advanced. standardized land prices, based on property appraisals and presented shown in published land prices, are useful references for analyzing and judging actual transaction prices; and are important as reference information generally. Also, where published land prices and actual transaction prices can be compared, the relationship between the standardized land price and actual transaction price (which can be a range of prices) will be clarified, and the importance of published land prices will be better understood as their usefulness is enhanced in the actual land transaction process. 
On the other hand, the collation of transaction cases for the appraisal of published land prices is based on optional surveys. Because of this, there are some who criticize published land prices saying their accuracy is low. It is expected, however, that the reliability of published land price indices will increase with the accumulation of transaction price data, and the calculation of published land prices based on more information.

There is also the criticism that, because published land prices are far removed from actual transaction conditions, it is difficult to use them in actual transactions. However, many of these criticisms are due to a lack of understanding of the meaning and objectives of published land prices. When disclosing actual transaction prices, it will be important to explain more fully what the published land prices indicate, that published land prices are adequate as a standard reference in a certain range of transactions or in certain areas, and how to use them after understanding the above. From this, greater understanding of published land prices will emerge, and greater use of published land prices can be expected. 
Furthermore, it is important to establish an environment where it is easy to refer to published land prices. Currently, a search of published land prices is possible within the website of the Ministry of Land, Infrastructure and Transport where the number of accesses averages 1.1 million per month (FY2002). The development of such an environment will lead to greater understanding and greater use of published land prices. 
By making the use of published land prices easier we also make various forms of market analysis possible, and provide more accurate and understandable land price information to the market and general public, along with the development and presentation of other types of land price information. With this, we can expect the revitalization of land transactions and promotion of land use.

(d) The Presentation of Non-Price Information Land related information other than transaction price information is also difficult for the general public to access, and this makes such information ineffective in the land market. This includes so called "property specification information" such as conditions of ownership and use, history, regulations and public laws, buildings on the land concerned and future development plans in surrounding areas. In the "Survey of Basic Information on Land Transactions", the number of purchasers who attach importance to "strength of foundation" and "surrounding environment" was large, other than transaction price information. Asked about the information they wanted to obtain on the purchase of land, 26.0% (the largest response) nominated "strength of foundation" while "conditions of soil contamination" was selected by 14.9%. (Chart 1-2-21).

Regarding property specifications, substantive data (other than important information such as maintenance condition and the history of repair and maintenance) is obtainable from public bodies such as city, town and village governments. It is important to develop an environment where general users can obtain easy access to such information through such facilities as the promotion of one-stop services.

Chart 1-2-21	Information that is Difficult to Acquire when Purchasing Land