HOUSEBUILDING UPDATE PART THREE:
LAYING THE FOUNDATIONS
(originally sent to Fukuzawa, ISSHO, and Friends Sat, 5 July 1997)
It's been three months since my last report (which can be found here), and plenty has happened. So much that I don't know where to start. Let me organize this post thus:
1) WATCH IT! ALMOST GETTING ROOKED BY OUR HOUSEBUILDER
2) LEARNING HOW TO SAVE MONEY BY TAKING ADVANTAGE OF IMPORTS
3) LEARNING HOW TO PLAY THE GAME AND CHEAT THE GOVERNMENT BEFORE IT CHEATS US
1) GETTING ROOKED
When we were three months into our negotiations, I breathed a sigh of relief at how smoothly things were going. Our Matsuken man in the Sales Department (I'll call him Mr Tanaka) was forthright and hardworking, house designs were coming in quickly and clearly, and he never forgot to answer questions we had asked weeks before. A timely amount of information and a mimimum of bullshit. Gosh, we sure chose our builder well, I felt.
Guess what? Pop.
ACCOUNTING MAGIC IN OUR HOUSE ESTIMATES
When we received our first list of preliminary building estimates (mi-tsumori sho) on April 17, we were looking at a 51 tsubo house, L-shaped, with balcony and other bells and whistles. A sketch of it can be found here at a separate URL.
The price we were given was 30,501,700 yen. Then, because we were going to be importing a number of expensive items ourselves (such as our kitchen, curtains (which cost thousands of dollars in Japan), electrical appliances, flooring, and doors), the price was cut down accordingly by Tanaka's boss to an even 27,000,000 yen. They gave us a cursory rundown of costs, the largest of them being "building costs" (kouji naikaku) of 24,423,900 yen, laying waterworks and sewage (yagai kyuuhaisui kouji) for about 1,000,000 yen, sinking foundation stakes (kui-uchi sekkouji) of about 1,700,000 yen, making the house "all-electric" (ouru denka kouji) at about 2,100,000 yen, and other odds and ends that of course added up. "This is only a preliminary estimate. More details are to come later. But FYI," was how mid-April negotiations ended up.
Then as April faded into May, our loans being secured as a swansong from a dying Takugin Bank, negotiations shifted into higher gears. If we were to get our house built before 1997's next snow flew, we would have to have a building contract signed by the end of May. One month to clear all costs, and negotations suddenly hit a near fatal snag. We discovered Soviet-style accounting on our revised building estimates.
A MAGICAL MAY 23
It was well into May before our revised housing estimate came through, and the headline was this: our house would be costing 32,001,340 yen (up from the 30,501,700 yen above).
Blink. This was a a surprise because our house design had radically changed in the direction of savings; it was no longer L-shaped, but square, which meant that costs should have come down by 10% (Matsuken's figure--because of fewer stakes to sink or corners to build around). Moreover, on the new designs (they are all at this URL in passing) the house had mysteriously shrunk , from 51 tsubo to 49.5 tsubo. Finally, the outdoor siding (which was originally pricey concrete, but Matsuken discontinued it, they say, for lack of demand) was now cheap aluminum.
The point is we were getting a smaller house, built less to our convenience, using cheaper materials, and paying nearly 20% more for it. I called foul, showed Mr Tanaka the door, and called up our independent housing consultant, a Mr Yasuda. We met him that evening in a hotel lobby for some eleventh-hour negotiations.
Mr Yasuda, perhaps one of the most impressive house designers I've ever seen in Japan (I have seen several of his designs made flesh, and they are both utilitarian and exquisite), is a man I trust with my house--he designed it, as a matter of fact. He knows his stuff coming and going at all stages of construction, and with only a glance at our estimates he knew something was fishy.
"This is too vague," he said. "Lots of room for cost upgrades, quality downgrades, and little tricks to skim off the top. Look, there are no mentions of exactly what materials they will be using where, the individual costs of those items, and no outlines of separate labor costs. All you have are headline prices with no body.
"Where I used to work, long before we reached the contract stage, we had all the building materials cleared, blueprints of the house far more detailed than these ready for inspection, and everything costwise recorded on paper and set in stone so there would be few surprises."
I asked: Why was there such a difference in pricing between the first two estimates? Did they think we wouldn't notice?
Yasuda: "Some of that is systematic, I think. Don't forget how the housing industry works for the sales reps. If Mr Tanaka is going to get promoted, he has to sell the most houses possible at the highest profits possible (Tanaka told me that his annual quota (noruma) is 7 houses, and he manages 9--the third best in the company). But the person who discounted the house from 30 million yen to 27 was Tanaka's boss, right? He's already proven himself and been promoted, so he's able to freely discount. But subordinate Tanaka's promotion depends on how much he gets out of you, so by raising it back to 32 million he might be undoing his boss's damage. Tanaka has never offered you any discounts, has he?" No, come to think of it, he hasn't. He always stresses quality and smoothness of negotiations. Just like any other Japanese trade negotiator.
Yasuda continued: "That's one thing. The other is that moneywise there are no secrets here. Matsuken secured your housing loan, so they know exactly what your budget is. Their goal is to soak up as much of it as possible, especially since some of the loan will be leaking out as you yourself import from America. So what they do is use some accounting magic as a plug. They are already doing some hocus-pocus right here."
Where? "Like here, with your 'system kitchen' [the same as a regular kitchen but a bit bigger, with more thingamabobs, and a higher price tag for being in fashion]. They originally said that if Matsuken built a system kitchen for you, it would cost 1,500,000 yen, right? But now that they know you are importing, look at what price they are now giving you under the 'system kitchen' category: 210,000 yen! This IS a possible price, but its the lowest possible. Meaning that they assess one amount in the original, subtract a far less amount from the new estimate, and pocket the difference: 1,290,000 yen. Quite a profit for doing nothing but change numbers.
"And they want you to sign a contract when? In a week? Don't do it until you get things straightened out. With the additional costs that will inevitably come up, by this estimate they will have just raised the price of the house by about 25% right before your eyes, and that's before the options! Don't fall into that trap. Have them list exactly what things will cost--for heaven sakes don't tell them what you'll be importing or they'll underestimate the Japan-side prices--and make sure they get subtracted properly when you export. Or you'll neither save money nor have enough to cover things.
"Above all, beware of traps. They're everywhere in this industry."
I got on the phone to Tanaka and gave him several pieces of my mind. He pleaded in response the previous estimate was only a rough one (possible, but can you honestly claim "rough" if it had no bearing on the future?), that there hadn't been time to get a more detailed estimate out sooner (possible but still irresponsible), that smaller houses do cost more because proportionally costs of floor space go up (possible again with economies of scale), that costs of materials were not listed individually because the total does not equal the sum of its parts (possible again due to package deals and bulk discounts), and that Matsuken policy is not to give too many details--since there are too many houses for our busy company's staff to deal with, and getting the customer too far involved in materials mixes the amateurs with the pros (um...come again?). Experience has shown that that causes more problems than it solves.
Okay, you asked for it. I sicced my wife on him. Aya is a former bank employee and knows her numbers (you should see her work an abacus or count bank notes--you'd fall in love with her too). No matter how nonassertive you think a Japanese woman may be, when its a matter of the pocketbook, my woman shows a tenacity that moves planets. With a surgeon's skill, she pointed out all of the little niggling pricing details that had nothing to do with time or policy. They were no more than broken promises.
Fix them, I said. Tanaka said he would try.
Yeah, sure. I could see where this was leading, so I brought out the big gaijin guns:
"Look, I know your incentives. Your promotion is on the line and all that, but your main responsibility is to us, the customer, not to yourself or some company policy designed to bilk the owner out of thousands of dollars through vagueness. Redo those estimates in enough detail so that even our housing consultant [identity kept secret, of course] will also be persuaded of your honesty. If he or I ever again even get a whiff that you are waving any magic wands, there will be big trouble in little Sapporo.
"Do you know who you are dealing with? I write a lot for the local press and the Internet, and one nasty word from me will be splashed across cyberspace to thousands of readers (I was bluffing, of course; apologies to readers out there, but all is fair in love and housebuilding), and Matsuken will never get another order from a foreigner in this town. Moreover we will not be signing any contract (that was definitely no bluff--I wasn't going to be in the red for the rest of my life for something we didn't order), so bang goes your precious quota anyway. Got it?"
If this were America, I think the housebuilder would have simply told me to fuck off. But this is Japan, and people seem to be more gamanzuyoi when there this much money and personal reputation on the line. I like it here.
MAY 31--THE SPELL IS BROKEN
Tanaka came by with his boss a few days later, but Boss did all the talking: "Here are all the details you asked for, especially for materials that you will be importing. I promise you these are comparable costs for the same items in Japan, and that we will subtract them accordingly." He handed us several sheets of lists and other papers for our perusal, then continued:
"Here is your new total estimate:
"It comes to 32,001,340 yen. Now just wait and let me explain. I know the price hasn't really changed, but it is only nominal. The basic price is same as before--27,000,000 yen--if you understand that that is the price before taxes and options. We anticipate that when everything is all done, imports subtracted out etc., the house will top around 30,000,000 yen. But for bank purposes, we have to say it's more, i.e. 32 million, or else all of us might not have enough loan money to go around. Of course, whatever money remains afterwards goes into your pocket. So don't worry, we will make everything fit within budget, with something left over after your imports. Even if it means we lose a little money in some areas."
I was of course incredulous. "Okay, thank you . We'll show this to our consultant, and if he says prices are fair and things are safely detailed, we'll go with you guys. But if not, goodbye. No games. Do you have confidence that our consultant will give this a passing grade?" Tanaka's boss said he did. "Okay, see you in a few days."
And that evening we met our consultant and got the lowdown. (Mr Yasuda is really on the ball, meeting us at a moment's notice, giving us frank advice--since he represents nobody but himself. I would recommend that anyone out there building a house here hire him for advice. Email me if you want a shoukai.) "Yeah, I think this a fair estimate for what you're getting. Just hold them to the prices and watch out for any other tricks builders like to pull when construction actually starts."
So with that, we signed a contract. Construction started July 14, 1997. We have no idea what tricks to anticipate, but doubtless I'll have a few to write about next time, Update Four, due September 1997 when finish importing stuff from America.
This brings us to the next part of this post.
2) LEARNING HOW TO SAVE MONEY BY TAKING ADVANTAGE OF IMPORTS
They say it is cheaper to buy foreign than it is to buy Japanese--and it's higher quality to boot. Don't doubt it. Examples of lower quality household items in Japan:
1) the predominance of plywood with polyester coating; knock on the back of just about any woodish piece of Japanese furniture and see for yourself how nondurable a good it is;
2) the fixation on light-colored and/or knot-free wood, such as Scandinavian pine or Lauan from the Indonesian rain forests, which never last as long as hardwood and anyway is never properly waterproofed in Japan;
3) the lack of anything solid; doors almost invariably have hollow cores, "flooring" is merely pieces of plywood stuck together with surface printing or a millimeter of real wood surface (one scratch or hearty chair-drag and it's ruined), almost any counter is laminated sawn timber (shuu sei zai)--that stripey wood finger-jointed together which looks cheap because it is. Even those natural-looking pillar posts that you see in Japanese tatami rooms are laminated sawn timber with a groovy stuck-on and sanded surface.
Hence, it's all facade--there is about much wood in Japanese wood goods as there is metal in a Japanese car.
And all this rubbish before you get into my pet peeves about countertops being too low or doors too narrow. But the punch line is a doozy: gape at the price tag. Often three to four times the price of America--especially when you look at electrical products.
So I decide to buy American. And buy it in America 1) before the construction industry tells the American exporters they have to cut to Japanese specifications (which eliminates any cachet the good might have), and 2) before the Japanese trading companies and distributors step in and take their 30 to 50% commissions for exotica (which eliminates the cost advantages). Readers, jump on an airplane, do the legwork, rent a container, import it yourself and save a hell of a lot on higher quality.
What will I be buying? Things like sawn timber, flooring, closet and room doors, Corian countertops, a lawnmower and a snowblower, sofas and chairs, kids bikes, curtains, lamps (Japanese and American electrical goods are compatible--except that attached clocks run slower), tools, carpets, and even a mailbox. 29 different items, for which even a back-of-the-envelope calculation that reveals on similar items (if there are any--Japanese lawnmowers or snowblowers, say, are in no way comparable to American) I will be saving about 1,500,000 yen, even after transportation costs. And for far better stuff. So, after some negotiations with freight forwarders on both sides of the Pacific, we got things rolling. I'll give you exact details for your reference in Update Four.
However, if you time things right, imported bargains can be found right under your nose, even in isolated Sapporo. One tale that might tickle you:
FAIR TRADES AT A TRADE FAIR
In June, 1997we had the annual Sapporo International Trade Fair (Kokusai Mihon Ichi) at one of our local symposium sites. I showed up on the first day and talked to an old Finnish friend, Arto, who was acting as a coordinator and interpreter for all the Finns bearing gifts. Within displays of lovely golden Finnish pine goods, a carpenter had brought along his door--handmade, waterproofed, with frame, handles and lock.
"Are you interested in Finnish doors?" Arto asked.
"Well, I will need eight interior doors for my house."
"Well, we could ship you some cheap from Finland."
"No, that's okay, thanks. Anyway, how about THIS door? Any offers on it?"
"This very door? Well, no." There was some consultation in Finnish, which sounds to me like people speaking backwards. Arto clicked back into my dimension. "Okay, as is, 22,000 yen."
I gave it the compulsory once-over. It was solid pine and a little narrower than I wanted, but it would fit our bathroom. "Okay, Arto. Done. I'll be back Sunday to collect it." Thus we had our first interior door.
But more fun was to be had on Sunday. A little bird told me to come back just before the Fair finished and bring about 100,000 yen cash. I walked around, feeling headstrong, and spied some Danish doors that were solid pine, spruce, and oak, again with frames, handles, locks, and even casing. I asked the main Dane: "What are you doing with these doors after all is said and done?"
"Shipping them back to Yokohama. Why?"
"It's going to cost you a lot to do that, isn't it? Japan's trucks and ships being expensive and all that. Why not sell them to me? I'll pay cash on the spot and cart them away myself. How much do you want for them?"
He paused and reflected. "Okay, one door for 25,000 yen, as is." Considering that one finished hemlock door--door only, without handles, hinges, frame or casing--costs about $275 in the US, I could see something happy was happening here. I said: "Three doors for 70,000 yen okay?" He didn't mind. He was a government rep and wanted to go home early. We shook and that was that.
So with Arto's help, I ended up loading four two-meter doors into the back of my poor Honda Civic hatchback (they just fit in terms of stacked thickness, but lengthwise they jutted out nearly a meter in back, meaning if I sped up too fast they would fall out, or if I hit the brakes too soon they would fly forward and break my neck), and hoped that no traffic cop was in a bad mood. I drove away and stowed them in my school office. Four doors down, four to go.
That should have been enough luck for one day, but I was on a roll. Before I left, I prowled around and found a Japanese trading company selling German AEG dishwashers (ready-customized to both Japanese electricity and water piping, making their own hot water, jets on top and bottom, 60 cms high) that were just the type we were looking for. Again, I used the magic words, "How about THIS" knock knock "machine? Could you sell it to us at a discount?" The reps were Japanese and thus Japanese about it, so we traded meishi and waited for someone to call the other. Fortunately (and unusually in sleepy Sapporo), they called us next day, and said that since it had been a display item, they'd knock the 300,000 yen list price down to 180,000 yen. They would even would store it and transport it out to our house when we need it in September. Sweet.
This was one situation where the high transportation costs within Japan worked to our advantage.
3) LEARNING HOW TO PLAY THE GAME AND CHEAT THE GOVERNMENT
Our descent into the realm of the rule-benders started a few weeks ago, when we travelled to the Hokkaido boonies, a city called Obihiro, to meet a friend who had built his house by hand. One look at his house exterior and I realized I had to choose sidings. He had used OSB (oriented-strand board) layered to look like wood planks, giving his domicile a San Francisco "shiplap" look. Far preferable to our current house design. Matsuken was going to give us aluminum siding with a choice of all of five, thank you, five colors that were all dull pastel greys. Great value for a half million dollars. I would never be able to send any proud "this is my house in Japan!" pictures overseas.
If you remember in my Update Two, I had initially suggested we use something called HARDIPLANK, an American (my Australian friend Simon proudly claims otherwise) cement siding, US Class A fire retardant, textured like wood, which can be nailed down like real planks and painted over. Matsuken declined to source or use Hardiplank because of its lack of fire retardancy certifications, and consequent detriment on our loan and fire insurance. The trade barriers had won the day.
But one Walkabout in Hokkaido's outback later, we saw how people get around government meddling.
Hardiplank houses are far superior in looks and fireproofness than most other siding, but the Japanese government doesn't care. "It hasn't been tested on We-Japanese's bodies, so it can't be used as medicine" sort of thing. Like the inspectors who reject California Japonica rice because it's "longer" than domestic, Hardiplank is only 9 mm thick, while laws require cement siding to be a minimum of eleven. Never mind that aluminum siding, an approved building material, is wafer-thin and would melt (burn, actually) in a fire. The point is that procedure matters: it's made in Japan, officially it's okay, so you can buy it. Get the certification if you want to sell in our market.
Well, how about that certification? "The Ministry of Construction tells me in an interview that it's actually VERY easy [emphasis in original] to get certified. It doesn't take five years, like you said in Update Two." This was said by Renate Davin, former trainee reporter at the Sankei Shinbun, who called me to confirm details after her information sources conflicted.
"They are lying." I said. "Or somebody is. My man at Matsuken looked around for some other American siding that had fire retardancy certification, or even JAS or JIS. He found NONE. No foreign siding has it. If it's really that easy, somebody would have passed by now. The fact is that it is a trade barrier and you're being had by a gaijin handler in Kensetsu-shou."
I continued: "Don't believe anything they of all people tell you. That ministry is singlehandedly the most important reason why Japanese have a comparatively lower standard of living in the OECD--homeowners all dense-packed into barren telephone-poled neighborhoods by profit-maximizing zoning officers, all being forced to recycle their jerry-built houses after a few years, and all paying high premiums because they must buy Japanese--through a Byzantine distribution network--for crap materials put together by slovenly carpenters. Your asking the MOC for input in your article is like asking the fox about the welfare of the chickens." I wonder how much of me she will quote.
So our man in Eastern Hokkaido gave us the goods on how he, as a distributor of Hardiplank, gets around the government: "If a two-storey house is five meters away from his neighbors, he need not worry about fire code restrictions on materials. The house could even be built of wood. But most people don't enjoy that much space, so that's why wood houses are so infrequent in Japan. Anyway, with Hardiplank, we put up the siding first and then start lying later. When the building inspector comes by and asks, 'Is this material made in Japan?', we tell him yes. He usually believes us there, but if he wants a sample, we have an ersatz OSB certified plank handy. When he asks us for the siding's code number, we give him one for a different, Japanese material. They never check deeper. But if they rumble us, say, Kin'yu Koukou (a government housing loan agency which won't pay your loan if you use many foreign materials) sends you a nasty postcard and tells you to reside your house, ignore it. It's a bluff. The money will still come through. And if you are worried about fire insurance not paying up because you didn't use certified materials, get insurance from a private institution, not the government. You're more safe as houses with Hardiplank than aluminum anyway, so rest easy.
"Most importantly, with Japan's deregulation, there's a chance in the near future that certifications that work in America will be allowed to work in Japan, too. If that's so, then Hardiplank will be grandfathered in. We use it out here all the time with no problems."
If I have the honor of being read by any overseas trade negotiators out there for construction materials (I just recently heard that I have!), I tip my hat to you and say, keep up the pressure. No other way than gaiatsu are you going to open up this market to imports, improving the standard of living for earnest Japanese citizens being victimized by a predatory bureaucracy.
More in Update Four.