Remote Work Drives Japanese to Suburbs, Boosting Home Lender
(Bloomberg) -- The work-from-home phenomenon during the pandemic is providing an unexpected boon for one of Japan’s biggest mortgage lenders.
Resona Holdings Inc. is enjoying a surge in demand for credit from homebuyers seeking larger properties in the suburbs, where the bank has a strong presence, President Masahiro Minami said. Its mortgage loans climbed 6.5% to 1.3 trillion yen ($12 billion) in the year ended March, the highest in at least three years.
“I didn’t expect the housing loan business to perform this solidly when the first state of emergency was declared in April last year,” Minami said in an interview, referring to Japan’s Covid-19 measures.
Like other countries, Japan has seen a jump in remote employment during the health crisis, prompting some residents to reassess the merits of living -- and working -- in cramped, inner-city apartments. That’s providing a much-needed opportunity for regional lenders, which have been struggling for years with weak loan profitability.
Minami said that before the pandemic, apartments located near stations in metropolitan areas were the most popular, but now more people are seeking detached houses in the suburbs. “For instance, some people think they need more rooms for family when they have Zoom meetings at home,” he said.
“Looking at data from Google Mobility, people in Japan are at home 10% more than they were before the pandemic,” Savills Plc research analysts wrote in an April report. “Therefore, there should still be some demand for larger apartments, realistically in suburban areas, that can better accommodate this overall lifestyle change.”
While Resona is based in Tokyo, much of its branch network is in areas skirting the capital, such as Saitama prefecture, as well as regional hubs like Osaka. The bank has about 13.3 trillion yen in home loans, among the highest in the 200 trillion yen market.
The trend is also benefiting some other banks outside of Tokyo. Bank of Yokohama Ltd. said its outstanding home loans rose 4.8% last fiscal year, due partly to the growing attraction of seaside residential areas like Kamakura.
Japan’s government has been asking businesses to make 70% of employees work remotely during the pandemic. While not all companies have complied, some have embraced the trend. Hitachi Ltd., one of Japan’s biggest employers, says 85% of its staff in the Tokyo area are either working from or staying at home.
Minami expects Resona’s home loan business to keep growing this financial year. Even so, he is concerned about a potential supply bottleneck due to continued strains on the procurement of building materials during the pandemic.
Shares of Resona have jumped 32% this year, rebounding from a 25% decline in 2020. The bank forecasts profit will climb 16% to 145 billion yen in the year ending March.
It remains to be seen whether the popularity of suburban homes will persist, Minami said, adding that condominiums in the city center are still popular. “We need more time to see whether it will be a major trend,” he said.
©2021 Bloomberg L.P.