Chapter2 Issues involved, and Approaches to Realizing Appropriate Use of Land

The status of land in Japan is changing structurally. The agents of change include population decrease, changes in industrial structure, and the formation of land-prices based on utility-value as decided by players who attach importance to the profitability and convenience of land.

In such circumstances, it is important 1) to realize land-use in a ways that reflect changes in socio-economic conditions (such as population decline), 2) to formulate rational property-prices through transparent and fair marketing of properties (in a market which had originally been characterized by information disparities between sellers and buyers), and 3) to develop high quality real property stock by utilizing stable long term private funds and by supplying excellent developed land.

1.	Approaches to Land Use in response to Changes in Socio-Economic Conditions, including Population Decline

(1)	The Utilization and Management of Un-utilized and Under-utilized Land Involving Various Players

It is anticipated quite obviously that un-utilized and under-utilized land will be produced in various areas through population decline and the conversion of industrial structures. When the management of un-utilized or under-utilized land is inadequate, concerns arise regarding deterioration of the environment and landscape, the incidence of fire and crime, the decline of local community vitality as a whole and so on. Regarding the utilization and management of un-utilized and under-utilized land, various approaches are being implemented in many areas. Currently, it is becoming important to conduct these approaches with the participation of NPOs and residents other than the land owners themselves, and to develop information resources concerning un-utilized and under-utilized land.

＜Case study＞

Comprehensive Development and Management of Station Square by Incorporated NPO(Kamagaya City, Chiba Prefecture)

An incorporated NPO (being the parent
organization for a panel of interest-holders
in blocks of land in front of the station) is
established at the start of a land
adjustment project. The NPO conducts
planning for development of the station
square as well as post-development
management, and improves the amenities
in the area.

＜Case study＞

Regeneration of Brownfield in England

the UK, for new property development the potential for regeneration at brownfield must be considered first, and in order to test this potential, they have developed a database showing the statusof land and buildingsavailable for redevelopment.

2.	Approaches to Rational Price Formation based on a Transparent and Fair Market

These days, the status that real property has advanced as it is increasingly traded as a financial product. In order to promote rational price formation for real property, it is necessary to develop the conditions for a transparent and fair market. It is also important to promote an environment that adequately appraises each property based on its profitability and convenience.

(1)	The Enhancement of Real Property Appraisals

Real property appraisals play an important role as the foundation of the real property market. In a situation of structural change in the real property market, it is important that this role be executed with precision and in a way that responds to new needs in the market.

(2)	The Development and Presentation of Information including Transaction Prices
In order to realize a market where all players can adequately judge the risks associated with real property investment and then invest without anxiety, it is important to develop information about income including rent, in addition to transaction price information in relation to land.

①	The Presentation of Information Relating to Land Transaction Prices

The presentation of transaction price information is an important policy issue in relation to market transparency and in promoting smooth and active transactions. Focusing mainly on Cabinet-order designated cities within the three metropolitan areas, the Ministry of Land, Infrastructure and Transport conducts research into transaction prices by surveying the transaction parties, and discloses the prices of transacted land etc., without identifying the subject properties via internet. (http://www.land.mlit.go.jp/webland/) From now, it is planned to expand the areas where such information is made available (mainly to Cabinet-order designated cities across Japan), and, after reviewing the effects of making such transactional price information available, to implement further improvements such as the enhancement of presentational content.

Chart 2-2-1

Chart 2-2-2

②	The Development of Property Investment Indices

In order to improve, develop and expand transparency in the property investment market, it is important to develop property investment indices which investors can utilize in investment decision-making (e.g. by quantitatively measuring risk return profiles); and as indices for evaluating post-transactional property management results. In Japan, although the disclosure of real-property related information affecting properties owned by J-Reits is advanced, it is important to develop real property related information covering a wide range of investment grade properties and it is desirable that internationally-comparable property investment indices are further developed by establishing a structure to collect essential information about properties in general. (see Chart 2-2-3).

Chart 2-2-3

Major Indices in Foreign Countries

	IPD UK Index	NCREIF index	PCA/IPD index
Frequency of publication	annually	annually	annually
Country coverage	UK	USA	Australia
Index starting date	1971	1978	1984
Number of properties (Note)	10986	4152	559

Sources:

"Survey into the Diffusion and Promotion of Property Investment Indices" (March 2005) by the Ministry of Land, Infrastructure and Transport

Note :

as at end of December 2004

Note :

Indices indicate levels of return on real property and are used for reviewing real property investment in a rational way, and objectively evaluating investment results.

(3)	The Promotion of Cadastral Surveys

Cadastral surveys develop the most basic level of information about land, including property ownership, uses of land, area measurements and boundaries per lot. However, the state of progress in completing cadastral surveys across the whole of Japan (as of end of Fiscal Year 2004) was only 46%; and a mere 19% in urban areas. (see Chart 2-2-4).In areas where cadastral surveys were not conducted, it is impossible to show exact boundaries, and this gives rise to concerns that boundary disputes may occur and that land can not be identified by its owners in case of inheritance. It is necessary therefore to conduct cadastral surveys as soon as possible. In order to further expand the cadastral survey, a "Basic Survey of Urban Sub-divisions Supporting Urban Renaissance" has also been promoted in urban areas since Fiscal Year 2004; as has the "Mountain Village Boundary Maintenance Project" covering mountain village areas.

＜Case study＞

Prevention of Disputes concerning Land Boundaries using Cadastral Surveys

When comparing land adjustment
projects (Tochi Kukaku Seiri Jigyou)
conducted in areas with almost the
same land-use (at around the same
time), between areas where a
cadastral survey has been completed
and those areas where a cadastral
survey has not been conducted,
there was a large difference in the
number of adjacent sites where
boundaries were not confirmed by
the interest holders at the first on-site
joint survey.

3.7 cases per 100 ha

48.8 cases per 100 ha

Cadastral Survey
completed area

7 cases for 190 ha

7 cases were resolved based on the results of cadastral survey

Cadastral Survey
un-completed area

143 cases for 293 ha

(4)	The Utilization of Fixed-term Land Leases

The fixed-term land lease, established in 1992, is a land lease system in which contracts are clearly terminated at the end of a pre-determined contractual period, providing benefits for both lessors and lessees. Fixed-term land leases promote effective land use by expanding the supply of land for lease. The fixed-term land lease functions to differentiate ownership of land from the use of land, and has increased its significance by allowing land to be utilized in various cases. However, further improvements to both the system and the operation of the system are indicated here, including a requirement to extend beyond 20 years the maximum lease-term in the case of fixed-term land leases for business use (currently not more than 20 years).

(5)	Various Approaches that Contribute to Pre-conditions for a Transparent and Fair Market
Apart from the above, the development of information systems utilizing property transaction prices belonging to the "Real Estate Information Network System (REINS)" has also been promoted, along with the development of legal systems that take into account of risks in real property investment, and the associated development of legal systems for the protection of investors in financial markets (Bill concerning the development of related laws associated with the Partial Amendment Bill for Existing Laws, including the Securities Exchange Law).

3.	The Formation of High-grade Real Property Stocks

In a situation where the conditions surrounding land is largely changing, it is important to maintain and utilize existing real property stocks, and to establish real property stocks of good quality for the purpose of achieving appropriate land use. To that end, it is important to utilize long-term and stable private funds, and also to supply high quality developed land.

(1)	The Formation of Real Property Stock through Provision of Long-term Stable Funds

From the viewpoint of establishing high-grade real property stock, it is desirable that stable funds under long-term management, such as pension funds, invest in the real property market. From now on, through improved transparency in the real property investment market (marked by advances in information disclosure and the development of market conditions where the various funds, including corporate pension annuities, can easily invest in property) it is desirable to promote this flow of funds utilizing both the nature of pension funds and the characteristics of real property. (see Chart 2-3-1).

(2)	Supply of High-grade Developed Land (Change of the Policy on Developed Land)

With the background of land-price decline, the slow down in the rate of population growth (and in the number of households) and the declining demand for developed land through land use conversion of existing developed land in built-up areas, it is important to make a policy changeover. Also, given that the decreases in population and in the number of households means a corresponding increase in land area per person, this is seen as a good opportunity to enrich affluent living space and public areas, including green space, which has not been realized in the past, In some areas, residents are establishing corporations or concluding contracts amongst themselves and through such means are promoting various initiatives to maintain and improve the amenity of the residential areas they inhabit. It is necessary from now on to discuss the structures for promoting such initiatives.

＜Case study＞

The Maintenance and Management by Residents of Common Land
and of a GoodQuality Living Environment (Tokyo, Tama City)

In N-City within Tama
New Town, a good quality
inhabited environment is
maintained through
community participation
(a work-shop system)
involving design-work,
the maintenance and
operation of meeting
facilities and the
maintenance of public
green spaces.

＜Case study＞

Garden City Maitamon Mitsuike Project (Kobe City)

In Tarumi-ku, Kobe City a residential land
development, with affluent site-sizes of 400
- 800 sqm (under fixed-term land lease) is
functioning on a former golf links, utilizing
the landscape features and greenery to
promote the concept of community and
residential land is a natural environment.

Image of townscape

(3)	Approaches to Regional Development utilizing Existing Stock

When it comes to land use in each region, it is important to utilize land adequately, responding to the natural, social, economic and cultural conditions in each region where the land is located. In many areas, approaches to town planning are based on the utilization of existing stocks

＜Case study＞

Development of Townscape and Trends in Land Price - Okageyokocho, Ise City, Mie Prefecture

"Okageyokocho" is a reproduced street
with a townscape set in the Meiji era.
An increase in sightseers and in the
life of the street have been observed.

Chart 2-3-2

Trends in the rate change of land prices near Okageyokocho


	Source:	"Published Land Prices" by the Ministry of Land, Infrastructure and Transport
	Note:	comparison between Areas near Okageyokocho (site number in Ise 5-3) and average for land in commercial use in Mie Prefecture

Chart 2-3-1	Financial Market and Real Property Market in Japan
	(Second Quarter 2005)



	Investment Market, Planning Division, Sub Council for Land Policy, National Land Development Council
	Note :	prepared by using "Flow of Funds (preliminary report June 2005, the Bank of Japan)", "2003 National Accounting (authentic information)", "White Paper on Land" and information by NLI Research Institute