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Olympics lures Japan property buyers

39 Comments
By Anthony Fensom for The Journal (ACCJ)

Japan’s shrinking population, soft economy, and growing stockpile of abandoned homes should all amount to a weak property market.

But buoyed by the 2020 Tokyo Olympic and Paralympic Games, as well as a wave of cashed-up Asian buyers, real estate in major cities is slowly starting to shrug off the post-bubble bust of the 1990s.

Describing the surge in Chinese buyers, Zhou Yinan, an Osaka-based agent at Chinese brokerage Sou Fun Holdings, said, “The demand is like water exploding up from a well.”

“The Chinese buyers had mainly been from Taiwan until last year, but that trend has been in reverse since October, as the yen has been weakening against the yuan,” he told Bloomberg News in a July 3 report.

Like the Chinese shoppers flocking to Tokyo’s upscale Ginza district, Chinese property buyers are reportedly coming to Japan for regular three-day property shopping trips, during which they visit cities such as Tokyo and Osaka.

The yen’s decline to 22-year lows against the yuan has boosted their spending power, while there is also confidence that the 2020 Games will drive up prices, as happened previously in Beijing.

BETTING ON JAPAN

While nationwide residential land prices have fallen for seven years straight, prices in the main metropolitan centers of Tokyo, Osaka, and Nagoya posted their second straight annual rise in 2014.

According to the Real Estate Economic Institute Co., Tokyo apartment prices have risen to their highest levels since the early 1990s, having advanced 11 percent over the past two years.

Yet for Asian buyers, Japan remains inexpensive. In 2014, Hong Kong’s median price was HK$4.9 million (US$630,000), more than 160 percent higher than the price of comparable properties in Tokyo and Yokohama.

Yields on Beijing property average just 2 percent, making Japan’s higher yields attractive to Chinese buyers who face restrictions buying second properties in the domestic market.

The average price of a three-bedroom apartment in Tokyo’s 23 wards and surrounding prefectures was ¥53 million (US$440,000) in April, compared with HK$8.4 million (about US$1mn) for a 600-square-foot apartment on Hong Kong Island, or US$554,000 for homes in New York.

For domestic buyers, the home-price-to-income ratio, representing the cost of a home relative to a buyer’s average annual income, increased to more than 10 times last year in Tokyo. But it remains well below its bubble-era peak of 18 times.

“Properties in Tokyo are cheap and the returns are relatively high,” Nomura Research Institute Ltd.’s Tomohiko Taniyama told Bloomberg.

“The quality of buildings is high, while investment opportunities are abundant, unlike Singapore or Hong Kong where the number of available properties is limited. In that sense, Tokyo is one of the best destinations for investment.”

TOKYO HOT ZONES

Kenneth F. Arbour, president of Tokyo-based Century21 Sky Realty Inc., says his high-end apartment buyers are mainly Chinese individuals with an eye for quality.

“They buy the cream of the crop in terms of who’s building top quality residential properties in Tokyo, such as those by Mori Building Co., Ltd. And they pay cash,” he says.

“When you’ve got buyers going into a lotto just to buy one of these places, like Mori’s Toranomon Hills, you know it’s a seller’s market. For these types of high-end properties, prices have gone up, not by 10 percent but by even as much as 50 percent.”

However, Arbour says buyers of relatively average priced apartments in central Tokyo (of between around US$500,000 and US$1 million) could still expect yields of up to 4 percent, well above those of major cities elsewhere.

He suggests buyers stay central for capital gain, rather than explore cheaper locations.

“If you’re a first-time buyer, I would really encourage you to stick to Minato-ku—you can’t really go wrong there location-wise,” he says.

Nevertheless, Tokyo-based architect Riccardo Tossani says foreign buyers are now venturing outside the capital’s traditionally favored but expensive “three As” of Aoyama, Azabu, and Akasaka areas.

“Foreign buyers are starting to look at Setagaya-ku, Meguro-ku, areas that are still very central but with tremendous public amenities such as hospitals and daycare centers—it’s worthwhile looking outside the three As,” he says.

WHAT TO BUY

Tossani suggests long-term Japan residents focus on detached homes rather than apartments, given the difficulty in remodeling apartments and the traditional reliance on land values.

Unlike in the West, land is typically worth up to two-thirds the value of a house and land package.

“When you’re buying an apartment, you’re only buying a portion of the underlying land, and it typically won’t appreciate fast enough to compensate for the depreciation of the building.

In value per yen, a single family, detached residence is always a better long-term investment than an apartment,” he explains.

Tossani says homebuyers can expect to pay around ¥300,000 for an architect’s “volume study” of a site and basic building schematic plans, which can be used to gain pre-approval for a loan.

After this has been approved, the Japan Institute of Architects has a sliding scale of fees: the larger the house, the lower the overall fee.

URBAN Vs RURAL

While the major centers are enjoying a revival, elsewhere the picture is more sedate. The average price of land for all purposes dropped by 0.3 percent last year, while nationwide housing starts declined 9 percent, partly due to the consumption tax rate hike.

Even in the major metropolitan areas, suburban property prices remain weak outside the “hot” suburbs.

Although last year residential land prices gained, on average, more than 3 percent in the heart of Tokyo, they declined in the suburban city of Ome, reflecting an increasing disparity between urban and non-urban markets.

“Land prices have yet to rebound on a broad front, and the concentration of demand in [big] cities will continue for some time,” Mizuho Securities real estate analyst Takashi Ishizawa told the Nikkei.

Fukuoka-based Ziv Magen, manager, Asia-Pacific of Nippon Tradings International (NTI), acts as a buyer’s agent for foreign investors seeking inexpensive Japanese properties, typically ranging from between only US$30,000 and US$70,000, but with high yields of around 10 percent.

“For yield purposes, we avoid the internationally renowned cities like Tokyo, Osaka, and Niseko in Hokkaido, where prices are too high and yields are depressed.”

Magen says he targets urban areas, where the population is stable or growing, and there is more than a single industry. Fukuoka, Kawasaki, Kobe, Nagoya and Sapporo spring to mind.

Jason Hurst, director of operations at International Solution Group, suggests foreigners can more readily obtain finance for investment properties such as apartment buildings, including 100 percent loans.

According to Chiba resident Philip Brasor, rural areas of Japan have launched campaigns to attract foreign buyers, highlighting their low prices for skiing or other tourist attractions.

GLOW OF TOKYO 2020

For foreign residents or overseas buyers, ultra-low interest rates, attractive rental yields, and the prospect of rising land values ahead of the 2020 Games have suddenly put Japanese property back in the spotlight.

While far from the bubble years when the Imperial Palace was reputedly worth as much as the entire state of California, after a long and bleak period, the sun may finally be rising again for Japanese real estate.

Custom Media publishes The Journal for the American Chamber of Commerce in Japan.

© Japan Today

©2019 GPlusMedia Inc.


39 Comments
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"While nationwide residential land prices have fallen for seven years straight... the sun may finally be rising again for Japanese real estate"

Maybe...

-2 ( +0 / -2 )

I bought a place with a nice roof garden for ¥43,000,000 twenty years ago. Real estate agents tell me I can sell for ¥16,000,000 in Kanagawa-ken. I do not see prices going up at all. Sort of sad. I guess I will eventually die in this place, but, I have great BBQ's.

8 ( +13 / -5 )

With Abenomics making the Yen worthless it's probably a good idea to convert savings into other types of assets. I'm not sure buying a place in one of the many "towers" that are being built is the best move though. They have high service charges, are often single aspect and must cost a fortune to cool in the summer. Don't buy anything built on reclaimed land or near the sea either.

3 ( +4 / -1 )

Olympics lures Japan property buyers

One born every minute.

5 ( +7 / -2 )

All I am reading is that Japan is continuing at a steady pace of ROT! This article basically say only as FEW downtown areas can offer a CHANCE at a return while pretty much the rest of Japan is in decline.

This uptick will be short, overall we are still headed south!

2 ( +4 / -2 )

Here in Shinjuku, a new 55 floor building with 1000 condos priced from 50 to 150 million yen. Every room was sold before they even started digging. Someone has lots of money.

3 ( +5 / -2 )

Whoever wrote this doesn't understand that there is no Japanese property market. Just like there is no US property market. Tokyo is correlated to Takamatsu in about the same way as Manhattan is correlated to Flint.

0 ( +3 / -3 )

I too bought a property 8 years ago for 52,000,000 yen. Today, the agent said will buy at 20,000,000. So, is Japan Today and other media making false reporting that properties prices are edging up?

5 ( +8 / -3 )

I bought a place with a nice roof garden for ¥43,000,000 twenty years ago. Real estate agents tell me I can sell for ¥16,000,000 so a loss of 27million yen over 20yrs!? in many cases its actually cheaper for people to rent than purchase new property/buildings I just bought a three storey building that 21 yrs ago was about 80million yen, I squeezed the owner down to about 26million!. seriously people dont get fooled into the new property market the depreciation on most of these is painful. There are huge amounts of used property buildings in great condition at great prices. While even used buildings depreciate also they do so at a much slower rate, so the loses are minimal. Have the building checked by a inspector to be sure its still structurally safe.

1 ( +3 / -2 )

A room in my condo in Shinjuku recently sold for the same price as when the building was new 13 years ago. Location, location, location. Not that I expect that always to be the case.

1 ( +2 / -1 )

We got our place for 3,500,000 spent about the same doing it up, and another 4,500,000 for a road (it is up a hill) and hope to sell it for considerably more than that total, but if prices keep going down we may end up getting what we paid for it. As wtfjapan says, if you get used property then there is much less depreciation. However, it is the dream of many Japanese to get a new property so you may not be able to persuade your spouse of the merits. I also find that beach house property is dirt cheap, we have three plots, because few people want a second home, for similar reasons.

4 ( +5 / -1 )

"the sun may finally be rising again for Japanese real estate. "

I personally don`t buy the hype - sure there will be a temporary uplift in certain areas of Tokyo in particular due to the Olympics factor and cashed up Chinese looking to park their hard earned , but after 2020 its hard to see any reason for appreciation at all. Of course some places will depreciate at a slower pace than others , like gokai-wo-maneku says but overall...? I think buying for yield or personal lifestyle reasons makes sense, but not really for capital gain ( with the exception of Tokyo over the next 4-5 years )

0 ( +1 / -1 )

Land prices are not going up only the houses and apartments... buy now and sell before 2020

-1 ( +2 / -3 )

It's sad foreigners can't buy a land in Japan, or Japan is expect applying an investor visa. That why so many people are just given up to live in Japan and looking other places to invest isn't worthy enough invest so much money if your business won't be successful or you're not the kind of person entrepreneurial want just working by other. Japanese government could see an investment a foreign is paying property tax and willing to pay taxes and even starting a family. Ohh well let it be Japan.

-7 ( +0 / -7 )

It's sad foreigners can't buy a land in Japan

Foreigners can buy land in Japan.

8 ( +9 / -1 )

Buying in the hopes of a few % yield here in Tokyo is like putting taking all your money (and then borrowing a few million more from the bank) to the Casino to see if you can win some money.

Maybe you get a bit of a win at the start, but anything can happen in this disaster prone country, and its not just your own money you are playing with. Not only that, anything you earn is heavily taxed.

I have gone down the investment property path before, and while i didnt lose much, it certainly wasnt a fun journey. My next purchase will be a nice house out in the countryside, with no loans no stresses.

1 ( +2 / -1 )

How about adding some facts to this discussion. From August 2015:

In Tokyo’s 23 wards, the average asking price was 48,660,000 Yen, up 2.1% from the previous month and up 16.1% from last year. This is the 14th month in a row to see an increase. The average building age was 22.2 years.

Price growth in central Tokyo continues to show no sign of slowing, with the average price in central Tokyo’s six wards reaching 68,290,000 Yen, up 2.0% from the previous month and up 16.6% from last year. This is an increase of 33.9% from the most recent market bottom of October 2012, when the average price was 50,990,000 Yen. The average building age was 21.0 years.

See more at: http://japanpropertycentral.com/blog/#sthash.1Xyj4Rtg.dpuf
2 ( +3 / -1 )

Stragerland Yes foreigners can own a home in Japan, but in order to buy real estate you will need to have a permanent residence visa.

-7 ( +0 / -7 )

Stragerland Yes foreigners can own a home in Japan, but in order to buy real estate you will need to have a permanent residence visa.

No, that's not correct either.

3 ( +5 / -2 )

@Joshua Degreiff Where are you getting your information? As the article says, nearly all the Chinese they are talking about are here on tourist visas, so you can buy a place on a tourist visa. Someone is pulling your leg. You don't need permanent residency or anything. And you can buy land. Are you thinking of China? Chinese like to buy here because you actually own the property. In China, you cannot buy but only lease for 70 years from the government. There is no guarantee your kids will get the property after you die.

1 ( +2 / -1 )

Anyone can buy land or buildings here, even with no visa. However, to borrow you either need permanent resident status or you need to be from China, HK or Taiwan.

-2 ( +0 / -2 )

Anyone can buy land or buildings here, even with no visa. However, to borrow you either need permanent resident status or you need to be from China, HK or Taiwan.

Again, this is incorrect. Shinsei bank will give loans to foreigners with no permanent residency.

1 ( +2 / -1 )

ti's sad foreigners can't buy a land in Japan I just bought a second property in. building and land, and while it can be easier if your japanese spouse is on the title its not nessesary. I have a bank loan and land title totally in my name. Youll need to be a permanent resident. And have all your income and tax records for the last 3yrs. Im self employed so im in the higher risk bracket forl bank loans. But since my business has very good financials fir the last 3yrs i got the loan easily. Like anything dont just take the first offer. Apply to 3-4 different banks. Youll be surprised what you may find.

-1 ( +2 / -3 )

Youll need to be a permanent resident.

While it helps immensely, it's not a requirement.

1 ( +2 / -1 )

Youll need to be a permanent resident. While it helps immensely, it's not a requirement. if your applying for a bank loan then a permanent resident is required by almost every bank, if your paying cash in full then not really required.

-3 ( +0 / -3 )

if your applying for a bank loan then a permanent resident is required by almost every bank

'Almost every' being the key word. Shinsein bank will, under the right circumstances, give loans to non-permanent residents.

0 ( +2 / -2 )

@Joshua Degreiff

It's sad foreigners can't buy a land in Japan, or Japan is expect applying an investor visa.

Japanese government could see an investment a foreign is paying property tax and willing to pay taxes and even starting a family.

Stragerland Yes foreigners can own a home in Japan, but in order to buy real estate you will need to have a permanent residence visa.

OK, I got it. You are whining because buying a house in Japan does not give you Legal Permanent Residency. I do not know where you are from but even in the USA buying a multi-million property does not qualify you for an EB-5 immigrant visa (investor visa). I do not know any western country that gives you a permanent residency just because you buy a house or land or even a parking lot. Even worst some countries like Australia for example ban foreigners or non-residents (in OZ case) from buying properties. Japan just like the USA allows non-residents to buy properties but I do not understand why you should get a visa for that purchase.

By the way, it seems OK for the Aussies to buy almost all of Niseko properties but forbid Japanese/Chinese investors from buying anything in OZ.

I am still surprised to see some foreigners buying properties in Japan for investment. It is quite funny for anyone who tries to know and understand the place. Here is the terrible truth: Prices in Japan will ALWAYS go down not up. Tokyo/Osaka is not London, Paris or Berlin. Things about properties and prices do not work like in Europe. Very regular earthquakes, climate (humidity) and many other factors lead to a quick properties depreciation.

Simply put: If you are buying now hoping to sell higher later, you just chose the wrong place.

-2 ( +2 / -4 )

'Almost every' being the key word. Shinsein bank will, under the right circumstances, give loans to non-permanent residents.

You forgot to include that they also charge a much higher interest rate for non-permanent residents.

1 ( +2 / -1 )

I forgot nothing. That doesn't change the point I was making at all.

-1 ( +2 / -3 )

Shonan, Ryoma, I think you need to get a new agent. On average, 10 year old condos sold at 85% of their value in Tokyo. For 20 year old condos it was a little over 60%. Again, that's average in all of Tokyo. In central Tokyo the resale value is much higher. I bought a 10 year old condo in central Tokyo 3 years ago and spent about 750,000 yen for renovations. Now, 3 years later, the price of my place is higher than when I bought it. How do I know? For three reasons. I have been taking note of prices in the area and they have been steadily rising, my property taxes have inched up (the rate is the same), and one condo on the same floor that is slightly smaller (and not kadobeya like mine) recently sold for a slightly higher price than when I bought my place. I estimate the value of my place is 10% higher, being larger and on the outside edge of the building. Therefore if I sell now I would probably make a 10 to 15% profit.

3 ( +4 / -1 )

Almost every' being the key word. Shinsein bank will, under the right circumstances, give loans to non-permanent residents. yes but they wont give you nearly as much as the the other major banks, there interest rates are slightly higher and you may need to give a larger down payment on the agreed amount , youll need to go to Tokyos main branch to finalise the loan, I know becuase theyre one of the 5 banks I applied to. SMBC and JA banks actually offered me better deals but like I said youll need to be a permanent resident.

-3 ( +0 / -3 )

I'm glad to see that you agree that this statement was incorrect:

Youll need to be a permanent resident.

-2 ( +2 / -4 )

Problem with Shinsei is they make it really difficult to borrow more than 100 million, which doesn't go far in southwest Tokyo. If you do have PR, you're better off with the other big banks.

1 ( +2 / -1 )

Is buy here to live or maybe to get away from the dire pollution in China but as an investment NO WAY! Japan's population is in a death roll unlike SF in the U S, the UK or Berlin in Germany. I invested abroad and with the equity rise and rental income have made twenty million yen in a little over 10 years on a 30 million yen investment In Japan Id be looking at a pitiful return Look at Japan's fundamentals and make your choice...

2 ( +4 / -2 )

@travelingsales exactly my point. if your not a PR and desperate use Shinsei bank, but youll end up paying for it in higher interest rates, shorter loan duration, higher monthly payments, due to the loan being of higher risk to them. If you can wait and or obtain PR then a loan with one of the other big banks will give you a better deal. In my case the SMBC loan saves me millions of yen in interest compared to Shinsei, like I said PR is highly desirable if you want to get the best deal.

1 ( +1 / -0 )

I would agree with wftjapan. I got 1.8% fixed rate for 35 years but I'm paying only 1% for the first 5 years because my condo meets certain standards. Movable rates now go for around 0.8%

2 ( +2 / -0 )

This is a sucker's bet. I've got my property in a great place, San Diego, and would never invest in Japan (more than I have by living 1/2 my life here, that is).

1 ( +1 / -0 )

are mainly Chinese individuals with an eye for quality.

The Chinese wouldn't know quality if they tripped over it. Greed is what they have an eye for.

-1 ( +0 / -1 )

The Chinese wouldn't know quality if they tripped over it.

On the contrary, many Chinese do know quality, and they are very aware of a shortage of it in their country. That's why many of them prefer foreign brands, and/or come shopping in Japan. They also say that while you can get quality in China, you need to be prepared to pay double.

2 ( +2 / -0 )

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