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Japan was the world’s second-largest economy for more than 40 years, until it was overtaken by China in 2010. After the early 1990s, Japan experienced what some have called a lost decade, during which time the economy stagnated and growth was substantially lower than before. Over the same period, real estate prices continued to drop, eventually settling at one third of the peak prices recorded in the late 1980s.
When, after restructuring, real estate business started to pick up again, it was a totally different market. In the wake of World War II, Japan’s real estate prices rose steadily, due solely to the macro economic trend.
However, real estate prices at the turn of the 21st century were heavily dependent on such factors as location, usage and money invested. Thus, while most real-estate players could easily be winners up until the 1990s, since then there have been both winners and losers.
The post-bubble recovery
From 2000 until the financial crisis in late 2008, the real estate investment and residential markets experienced a substantial recovery. Thus, in 2009, the value of the most expensive commercial land in Tokyo was nearly the same as it had been at its peak in 1990.
However, once the current economic crisis took hold, institutional investors, who had previously played a major role in the transaction market, became very conservative. The impact this had on the global economy was so serious that real estate transactions decreased drastically worldwide.
Due to the euro crisis and the strong yen, the Japanese economy again entered a grey zone, its situation exacerbated in 2011 as a result of the Great East Japan Earthquake, resultant tsunami and the nuclear power station disasters. In addition, the production lines of many Japanese corporations were hard hit by the severe flooding in Thailand’s major industrial zones.
A New Japan?
One might well wonder whether Japan is losing its position in the global economy. Considering the three expressions that signify the economic presence of Japan—“Japan Bashing” in the 1980s; “Japan Passing” in the 1990s; and “Japan Missing” so far this century — we ask if Japan will be left behind China, South Korea, India, Taiwan and other Asian countries?
The answer is ye s— and no. Yes, because Japan will no longer be able to achieve its earlier high level of economic growth. And no, because Japan is capable of enhancing its mature economy at a sustainable pace.
Although the problems related to aging and depopulation that face Japan will weaken the country—as also the real estate market— domestic and foreign long-term investors have recently been returning to the property market, possibly attracted by promise of the nation’s post-quake recovery.
Market moving forward
According to major developers in Tokyo, there has been a recovery in sales of new condominiums, particularly those in centrally located, earthquake-resistant high-rise structures.
With consumers having awoken after a year of restraint, April saw a number of major commercial complexes open, including the Mitsui Outlet Park Kisarazu, Tokyu Plaza Omotesando Harajuku, Diver City Tokyo Plaza and Shibuya Hikarie.
Value of real estate today
The real estate market here used to be criticised by many global institutions for its lack of transparency. However, the situation has improved and the market is much more transparent than before. Now, the Ministry of Land, Infrastructure, Transport and Tourism provides real estate sales data online in Japanese and English, while the Association for Real Estate Securitization provides comprehensive investment property information in both languages.
Unlike the easy days of the 1980s, however, asset values have become a more complex issue than before.
© Japan Today
21 Comments
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ExportExpert
Owning property here is still better than paying rent no matter how you cut it.
malfupete
umm.. don't you need to be a citizen to purchase real estate in this country? or you have to find someone to be your co-signer? I'm confused about owning property in Japan
cleo
No.
japan_cynic
However, it helps to have at least permanent residency if you want a mortgage. (though it's not always necessary)
GW
getting PR helps getting a loan, but if you have the $$$ you can buy
2020hindsights
Not at all. But getting a loan can be difficult without PR. However, I know some people who have got loans in Japan without PR.
Why is that?
nath
Yeah, I'm going to listen to someone who can't even do his math.
Japan had the second biggest economy from 1980 to 2011. How does that make 'more than 40 years?
J-Boh
There is a common misconception that renting is "just throwing money away" by contrast with owning your own home. This only true if house values are rising more than other investments would have done - a lesson a lot of people are learning the hard way in recent years.
In Japan, buying residential property is made significantly more attractive by various associated tax breaks, but these are only valuable if you have Japanese income. In fact these tax breaks apply even if the home in question isn't in Japan. Property transaction costs are high in Japan (it's not unique in that respect) so generally it's only worth buying property if you're fairly confident you're going to want to keep it for at least 5-10 years, I'd say.
Of course there are also non-financial advantages to owning your own home. Like doing your kitchen and bathroom how you want them.
Herve Nmn L'Eisa
Having PR is not necessary, but makes getting a mortgage easier. As with anywhere, being a homeowner(or a home-loan owner) has pros and cons. Citizenship is NOT required, but legal status IS.
napoleancomplex
@j-boh: I'd agree with your sentiment that renting is not throwing your money away.. at the end of the day, it depends on an individual's situation and preferences. We all need shelter, renting is one way of obtaining it.
and never listen to those people who say that owning real estate will always make you money. Its like an investment advisor telling you this stock is a sure fire winner!
JeffLee
Renting is the only choice in Japanese cities. There are people who got mortgages a while back for, say, around a million bucks, and now their properties are worth half that. So they will spend the rest of their lives paying off that huge amount of money and end up becoming impoverished in the process. How depressing is that?!?
Commuting routes are a vital issue in urban Japan. So if your employer changes locations, you may end up with a 3-hour commute on jammed trains every morning. No thanks!
Anyway, most Japanese homes are ugly, uncomfortable and lacking in amenities. The brand-new units are a vast improvement from before, but they seem really overpriced. Further, there's light-touch zoning, so a rubber-burning factory can be built right beside your family home and there's nothing you can do about it. Homeowners are chumps!
GW
For the little guy I wudnt recommend investing to MAKE $$$ in realestate anywhere in Japan, unless you have access to those secret auctions where you can buy those company owned resort spots which I have seen being sold for less than peanuts so they cus be flipped, no doubt there are a lot kickbacks you wud need to pay to the powers that be that sold out their own companies but............
At best at the end of the day you hope to sell so that the years you spent paying you can get kind of a "discount" compared to if you had rented.
That said I bought but am in the sticks a bit, not sure if I wud have considered buying in or close to a city, the additional risks for me wudnt likely have been worth it
ExportExpert
Aside from the tax relieve, If you have bought right you can pay your mortage and later in life you can sell the property and get most of or all of the money you have paid in mortage payments back in the sale price, lets just say you will lose less, plus often the mortage payments will be less than what you currently pay in rent, property does not increase here in value like in aussie , uk or NZ so making tons of money off owing a house is not happening here.
Plus you can reform remodel the place to suit yourself and you also get other advantages from being a property owner, ie having a fixed asset.
But if you rent after years of living there all you can do is move out and expect nothing back.
2020hindsights
True. But getting a 30 year mortgage is quite a commitment. Let's say you lose your job and you leave Japan. Paying your mortgage from overseas with the strong yen could be difficult.
So, it isn't always the best thing to buy a house over renting.
ExportExpert
Can always rent the place out to cover the mortgage, or if you are scared of commitment and do not have stability then maybe renting is the cotton wool safe way to live for some.
2020hindsights
Or maybe you can't...
It's not about being scared of commitment. There many factors. Also in Japan after thirty years an apartment may have very little value because it is old and the actual land associated with it is very small.
Harry_Gatto
We have two houses in Tokyo, live in one and rent the other. It is a good size, western style house with parking and small garden. After the previous tenant left it took one year to find a new one, at half the pre 2008 rental. Rental market is way down and is only now showing some small signs of recovery. There are bargains to be had compared to rental prices 4 years ago.
AEROCASTER
don't you need to be a citizen to purchase real estate in this country?
If you have the money, you can buy. No need to be Japanese, but having a Japanese to help in negotiating the process will be necessary.
VicMOsaka
ExportExpertMay. 24, 2012 - 10:36AM JST Owning property here is still better than paying rent no matter how you cut it.
Can't agree with you on this one. Wors't thing we ever did was purchase an apartment which is now worth half of what we paid for it. We would have been much better off renting where there are no corporate fees, no mortgage interest to pay, no asset tax etc. Even the land agent we are dealing with who is wealthy, rents an apartment.
The only way it would work here is to buy a fore closed property that someone else has lost their money on.
tmarie
Owning property here is still better than paying rent no matter how you cut it.
Unless your company pays for more than half your rent and you lose that the minute you buy - which is exactly what my husband's company does.
Also add in, unless you buy and then get transferred abroad or to another city - which is exactly what my husband's company does. His sempai built a place, lived it in and has now been in the US for nearly five years. He tried to rent it to us but the location for us is crap - and for many others as well so it sits empty. How is that any better than renting? Add in all the fees and insurance issues which makes renting out your place a nightmare greatly discouraged as well) I don't think buying is a great idea unless you know you will live and die there - and that the land is already developed because as someone mentioned, zoning is so lax here, you could end up with a garbage dump next to you a few years after you bought and built.
That being said, I want to buy as I am sick of apartments, not having a garden and dealing with neighbours.