In a recession, there is usually one investment which is a safe bet -- real estate. And now is a good time to consider buying property in Japan, says Christopher Dillon, a Hong Kong–based writer and principal of Dillon Communications Ltd, a boutique consultancy.
Born in Canada, Dillon lived in Tokyo from 1989 to 1992, before moving to Hong Kong. He has since worked with some of the world’s most successful companies, including Bechtel, Deloitte, the Economist Group, Manulife, Munich Re and Wal-Mart. He is also the author of "Landed: The guide to buying property in Japan," which followed his first book, "Landed: The expatriate’s guide to buying and renovating property in Hong Kong."
From time to time, Dillon leads small-group and one-on-one communications workshops for senior executives in China, Hong Kong, India, Japan, Korea, Singapore and Taiwan, and is also in demand as a speaker at conferences and seminars.
Japan Today hears more from Dillon about real estate investment in Japan.
How often do you visit Japan?
Three or four times a year, on average. Tokyo is one of my favorite cities.
Is now a good time for overseas investors to consider buying property in Japan, especially considering the high yen?
It’s a good time to invest in Japanese property, but you have to be selective. For example, I like Tokyo, which benefits from migration from other cities and prefectures. As an investor, I also like older apartments in working-class neighborhoods. These properties are inexpensive, yields are good and there is strong, stable demand.
I also believe the bad news about Japan has been overdone. If all you know about Japan is what you read in the papers, you’d have to conclude that the country is a smoldering ruin. Japan has problems, but it remains the world’s third-largest economy, it has advanced technology, a skilled, educated work force, and tremendous social cohesion.
The yen’s strength is not major issue. The Americans and Europeans seem intent on keeping their currencies weak – to the detriment of Japan, Canada, Australia and other countries – and I don’t see that changing any time soon. Furthermore, the Economist’s Big Mac index shows that the yen is overvalued by just 5% on a purchasing-power parity basis.
What are some peculiarities of the Japanese real estate market that you don’t see in other countries?
Japan differs from Western housing markets in many ways. One of the biggest is in the preference for new property. In Japan, used homes represent about 13% of total sales, compared to 78% in the United States and 89% in Britain. That is changing, as the Japanese government encourages the construction of long-life homes, but many people still see homes as consumable items.
Also, the idea of a “handyman’s special” — where you buy an old, decrepit home, fix it up and resell it — is uncommon in Japan. Most home are demolished after 30 years and rebuilt.
Another difference is the lack of insulation. Given that Japan imports almost all of its energy, double-glazing, thermal insulation and other environmentally friendly technologies have been slow to catch on. A fourth difference is in the accessibility of information. In the United States and Canada, the Multiple Listing Service (MLS) and zillow.com give buyers a huge amount of data. The Japanese equivalent to MLS, the Real Estate Information Network System (REINS), is only available to real estate agents.
Are you personally looking for investment property in Japan? In which countries do you invest?
In October, I bought an apartment in Tokyo and I’m always looking for interesting investments. I also own property in Hong Kong.
Are there particular areas in Tokyo where people can look for bargain properties?
Prices in grittier areas, like Adachi-ku and Itabashi-ku are surprisingly inexpensive. If you want to live in Azabu or Hiroo, on the other hand, you’re going to pay for the privilege. The irony is that working-class neighborhoods in Tokyo are not like working-class neighborhoods in other cities, which are often rundown, crime-ridden and poorly served by transportation and other infrastructure.
You can also find bargains in rural areas, but you have to consider the economic viability of the community where you’re buying. With declining populations and the hollowing-out of Japan’s manufacturers, there have been lots of cutbacks to essential services, like hospitals, schools, train services and so on. Those cutbacks don’t bode well for your quality of life or rental yields.
How well received have your two “Landed” books been? Which one sold the most copies: Hong Kong or Japan?
Reviews for both books have been positive, and the first book was on the Hong Kong bestseller list for several weeks. But what I’ve really enjoyed has been the feedback from people who used the book to buy a home. One of my neighbors, who stopped renting and bought an apartment, told me, "I think of 52,000 ways that I love you every month," referring to the difference between her rent and mortgage payment. That was a very pleasant surprise.
The Hong Kong book has been on the market for nearly three years, so it has sold more copies. But the Japan book is catching up.
Are you thinking of writing another "Landed" book?
I’m looking at several markets that might benefit from a Landed book. Ultimately, I’d like to create a franchise similar to the Lonely Planet guides.
How is Dillon Communications doing? Has 2010 been a good year for you?
It has been a good year. Hong Kong’s economy is booming and there is a sense of optimism in the air, largely due to China’s rapid economic expansion.
Do you enjoy speaking at events and conferences? What do you learn or take away from such events?
Speaking at conferences makes up for the time you spend alone writing. While it’s great to hear that someone enjoyed the book, I also appreciate the critical remarks. There is always something that can be improved, an issue that you haven’t addressed or an idea that can be incorporated into the next edition. If you listen closely, there is always something you can learn.
How do you like to relax when you are not working? Any hobbies or sports?
I relax by spending time with my family. My kids play rugby, which is hugely popular in Hong Kong, and weekends are often spent cheering them on. I’m also active in the Society for the Promotion of Hospice Care and the local TED conferences.
Chris Dillon will be leading an online webinar in which he will share his insight and experience on the Japanese property market. If you are interested in finding out more, the webinar is open to all. Find out more info at: http://www.realestate.co.jp/2010/11/26/webinar-to-learn-about-buying-selling-and-renting-property-in-japan/© Japan Today