TOKYO (REUTERS) - "Abenomics" has convinced Ms Ayako Onishi and her husband that now is the time to buy their first home.
The couple, who had their first child last year and are looking to move into Tokyo from the suburbs, are part of a rapidly growing number of people looking to buy houses and apartments in the wake of aggressive economic policies pushed by Prime Minister Shinzo Abe, who is set to cement his hold on power with a big upper house election victory this weekend.
However, the buying burst may be temporary as many purchasers are jumping in to the long-moribund residential property market to avoid paying more later in taxes and interest payments.
The risk is that after a planned increase in Japan's national sales tax takes place in April and rising interest rates push mortgage rates higher, buyers' enthusiasm will wane.
That will add to pressure on Mr Abe to follow up his economic stimulus measures with economic reforms that will raise Japan's growth rate longer term.
Still, the pick up in the property market is an early victory for Mr Abe since he took power in December. His brand of economic policies - dubbed by the media as Abenomics - has seen investor and consumer sentiment improve.
"The showrooms were crowded. We tried to make a reservation for a Friday, but we had to wait a week," said Ms Onishi, 35. "The sales tax and mortgage rates are the top reasons we are looking for a place now." Mr Abe must decide in coming months whether to proceed with a planned doubling of the sales tax, starting with an increase in April 2014 to 8 per cent from 5 per cent. The hike is central to the government's plans to rein in Japan's massive public debt, which is more than twice the size of the economy.
The rise in long-term interest rates, by contrast, is an unintended consequence of massive monetary easing - which was meant to push rates down in the near term while pulling Japan out of 15 years of deflation.
Property developers in greater Tokyo sold 81.6 per cent of new apartments they brought to market in June, the Real Estate Economic Institute Co, an industry group, says. Many buyers in Japan and other Asian countries prefer to buy new homes.
The rise was 2.9 percentage points above a year earlier, the biggest in three months. In June, 16 developments with a total of 409 apartments sold out on the first day. Sales rates in areas of western Japan, including Osaka and Kyoto, were a bit lower but still "booming," the institute said.
This boom could peak by the end of September because buyers of homes under construction need to make sure their contracts close before the April 2014 tax hike. If they buy after September, they might not be able to close their deals before the tax goes up.
"Housing demand will drop after the first tax hike, but the pullback won't be nearly as bad as it was the last time the government raised the sales tax, in 1997," said Mr Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute in Tokyo.
That is partly because consumer spending will likely pick up before the tax is raised again in 2015.
Unlike the tax increase, the rise in interest rates was not planned.
The Bank of Japan's (BOJ) aggressive monetary policy aimed to crush bond yields and so spur economic activity, through the massive government-debt purchases it announced in April.
Instead, yields are higher as the bond market struggles to adjust to the BOJ as the dominant player and as some investors start to price in inflation. As a result, mortgage rates have also risen.
Sumitomo Mitsui Banking Corp and the Bank of Tokyo-Mitsubishi UFJ have raised the 10-year interest rate for their most-qualified borrowers, a benchmark used for setting mortgage rates, by 35 basis points to 1.70 per cent. Mizuho Bank has raised its rate by 30 basis points to 1.65 per cent.
Borrowing rates are rising enough to make people feel they need to take out a mortgage now but they have not risen nearly enough to harm the rest of the economy, bankers suggest.
"So far we are not hearing any signs of the housing market losing steam," said Mr Yasuhiro Morito, a consumer-loan banker at Resona Bank, the core unit of Resona Holdings Inc.
The number of Resona's new housing-loan contracts jumped 20 per cent in the second quarter from a year earlier, while applications for pre-loan screening were up around 25 per cent, Mr Morito said.
Japan's overall bank lending rose 1.9 per cent in June from a year earlier, the fastest pace in four years, BOJ data shows.
Demand is being helped by banks busily promoting fixed-rate mortgages on TV and radio. Magazines are bursting with advice on how to take out your first mortgage, whether to refinance your existing home loan and how to take advantage of new tax breaks.
Japan was the fastest-growing economy among the Group of Seven industrial powers in the first quarter, thanks to Mr Abe's stimulus spending, a recovery in exports on a weaker yen and a pickup in consumer spending. The unemployment rate is falling, labour demand is at its strongest in five years and there are tentative signs some firms are willing to increase bonuses.
And yet, many of Japan's home-hunters are cautious about the economy because their base pay has not risen. A rise in base pay, which data shows has not risen since 2005, will be critical to the success of Abe's policies otherwise the inflation he hopes to generate could mean that real wages fall.
In Osaka, Mr Akira Yamahara, 47, said he is rushing to buy a house before the sales tax goes up, but he expressed caution.
"Abe's policies haven't trickled down to other parts of the economy," he said after visiting a showroom to look at floor plans. "I personally don't feel like the economy is recovering."