Japan: Strategic goals

As Japan\'s World Cup team left for Germany more than 1,000 fans gathered at Narita airport to wish it luck. There are high hopes for Japan\'s performance in the tournament and the country is glowing with confidence, much as it sees the future for its mortgage market.

The mortgage market in Japan is interesting. Unlike most countries, both land prices and the number of new houses being built have decreased since the bubble economy burst in the 1990s. Price declines have also placed a natural limit on growth in the equity loan products that are seen as common in other markets.

However, from a record low of new house-builds in 2003 the market has been recovering, especially in cities such as Tokyo. In 1993, around 24 million people in Japan owned a property. This figure had increased to 29 million by 2003.

Housing demand is expected to increase as children of the baby boomer generation who were born between 1971 and 1974 reach their mid-30s, an age where demand for housing is typically strong. This will be further supported by the end of land price declines. Land prices in big cities are likely to go up, while land prices in other towns and smaller cities are beginning to level out.

Although interest rates are predicted to start rising from almost zero in the near future, these increases are likely to be small and customers are expected to shift to longer term fixed rate mortgages.

Home ownership is encouraged by the Japanese government through tax incentives, while the Government Housing Loan Corporation is offering 35-year fixed rate mortgages through major banks and mortgage lenders.

Several social factors influence the mortgage market and these include employment trends such as the emergence of double income families, working women, frequent changes of employment and a growth in contract and part-time employment.

Lenders are expected to adjust their strategies to reflect this situation. And the ageing population looks set to become another challenge for lenders.

Based on these trends, GE Money (Japan) is targeting the near prime segments that are typically under-serviced by mainstream lenders. GE Money may be a new entrant to the mortgage market in Japan but it continues to leverage best practices to offer flexible products designed to meet customer needs.

GE Money is also a pioneer in building referrals from other banks and strengthening relationships with local real estate agents.

Hidehiko Ibaraki is spokesman for GE Money (Japan)