Tokyo Aging Buildings Spurs Real Estate Investment Incentive

Japan Properties

Japan Real Estate

09 Sept, 2018 –

The Tokyo government is working towards introducing a system to encourage the redevelopment of ageing apartments by offering developers additional floor space ratios on other projects. The new system could potentially be introduced in 2019.

Under the proposed change, if a developer buys an older apartment block they may receive a floor area ratio allowance that can be used towards a new apartment tower to be built somewhere else. The older apartment building they purchased can be demolished, and, if the developer buys an additional older apartment block nearby, they can then obtain further floor area ratio allowances to apply to the redevelopment. The idea is that this will spur on the reconstruction of ageing buildings. Buildings that were once not appealing to developers due to floor size limitations could potentially become more appealing.

Due to changes in zoning and height restrictions, some of the older apartment buildings in Japan are no longer compliant. In other words, if they were to be rebuilt, they may not be able to be built to the same scale or height as the older building. If they were to go ahead and rebuild, apartment owners would have to settle for smaller apartments in the new building – something not many find agreeable. Developers, too, are not willing to assist with these redevelopments as they cannot obtain extra floor space that can be sold to cover the cost of rebuilding.

The purchase of old Building 1 allows additional floor space to be added to the construction of new Building 2. The purchase of old Building 3 allows additional floor space to be added to the reconstruction of old Building 1, which is replaced by new Building 4.

There are approximately 1.81 million units in condominium buildings across the Tokyo metropolitan area. Of those, approximately 130,000 units, or 7%, were over 40 years old as of 2013. By 2023, the number is expected to triple to 430,000 units. 30% of the condominiums in Japan are located in Tokyo.

(Source – Japan Property Central, Pic – Tokyo / “B Lucava“)

Is Co-Working & Co-Living Japan’s “Next Big Thing”?

Japan Properties

20 Aug, 2018 –

Living, cooking and saving together

While share-houses have existed in Japan for many years, and have been quite popular particularly since the 1990’s, their character is changing fast. While in the past these residences were known as “Gaijin houses” (foreigner houses), and hosted mostly foreigners who were short on cash and had no access to guarantors, who are required for most normal property rentals – these days more than half of the residents are actually Japanese. And while, in the past, the only Japanese who lived in these homes were those who wanted to study English or otherwise associate with foreigners, there are now all types of homes which fall under the “share house” category in most bigger cities in the country, local Japanese web portals where companies running these residential operations advertise their living spaces, and even themed guest houses to suit all tastes, focused around common interests, such as art, design, music and even love of animals.

The main advantages, aside from the obvious mingling opportunities, are cost and location. While a central Tokyo apartment for a single or couple can cost the same as a private room in a share-house – the move-in fees, which can often come up to several months of rent for normal properties, are far cheaper – and there are less securities required. This suits mainly younger people, in their twenties and thirties, who are wary of committing to a rental lease and are reluctant to spend thousands of dollars (hundreds of thousands of yens), without being able to afford living where they really want or need to, often compromising on long commutes and less than desirable suburbs in the process. Many Japanese who have studied or lived abroad find themselves stranded upon their return to Japan, while looking for a new job and having depleted their cash reserves – and having most likely already experienced co-living while overseas, often with foreigners as well, these arrangements suit them perfectly.

Last but not least, while Japanese apartments are notoriously small, often with just enough room to place a sleeping mat and some clothes in, these larger homes often have gardens or back/front years, large entertainment areas, and far better equipped kitchens – and so, those who do not mind sharing the common areas with other, hopefully like-minded individuals, can enjoy a far more spacious living space.

From an investment perspective, these homes can generate far higher income than standard tenancy arrangements, and with the growing popularity of the co-living theme, there are now plenty of companies operating such spaces on behalf of investors and owners, making this a viable, relatively hassle-free property investment for owners as well.

Creative, affordable co-working office spaces

While Japan has been long lagging in its start-up & entrepreneurial spirit compared with other countries around the world, the last decade has seen a rapid disintegration of the unwritten “lifelong employment” contract between Japanese companies and their employees – which has long been the staple of the risk-averse Japanese psyche. As companies struggle with lack of efficiency, and are forced to let long time employees go, the Japanese have become more accustomed and willing to take bigger leaps of faith, resulting in a budding start-up atmosphere that, while not quite gripping the country by storm, is certainly taking shape, and is accelerating quite quickly across the country – with the two main locations for would-be entrepreneurs being Tokyo and Fukuoka cities, on opposite sides of the country. While Tokyo boasts huge international appeal and plenty of opportunities to connect with like-minded business-folks from all walks of life, Fukuoka, which enjoys a lower cost of living and advanced governance, is a close contender for the “start-up capital” crown. Of the two, Tokyo has a larger number of co-working spaces and “hot-desk” offices, while Fukuoka is becoming more famous internationally, and also has better support – being the only place in Japan that has instated special “entrepreneur visas” for foreigners who wish to try and set up a business in the city – enabling them to bypass required bureaucracy for up to six months – and also offers a number of government programs offering to provide mentorship, advice and locations for both local and foreign business owners who wish to make their idea a reality.

There are now hundreds of co-working spaces all around the country, of various styles, sizes and in many more or less central locations – as well as an ever- increasing presence of angel investors and business incubators active in the Japanese start-up market – and the more daring Japanese out there are taking notice of this expanding infrastructure, and forego standard employment in a large Japanese firm in lieu of taking a shot at their dream. And while both Fukuoka and Tokyo are still a far cry from the hub and hum of Silicone valley or Tel-Aviv, compared to the typical Japanese working environment of the past, something has definitely begun to stir in this regard here as well. And in this space, as well, there are plenty of management companies ready to facilitate their services in leasing, maintaining and managing those assets on behalf of investors, who are already capitalizing on this prominent trend.

(Source – Ziv Nakajima-Magen, Nippon Tradings International”, Pic – Japan Properties / “Ziv Nakajima-Magen“)

Investment Opportunities in the Japanese Hotel Market as Revenues Increase

Hotel Investments Japan

Japan Hotel Investment Market

16 Aug, 2018 –

With the 2020 Summer Olympic Games in Tokyo just over two years away, investors are taking a closer look at Japan’s hotels. According to the Japan National Tourist Organization, more than 25.5 million travelers visited Japan last year, an increase of 19 percent over 2016 and more than 300 percent above the 6.2 million visitors recorded in 2011. And as the games draw closer, JLL Hotels & Hospitality Group expects these numbers to grow—offering a great opportunity for investors and developers.

The Olympic Effect

Tourism demand is expected to grow significantly toward the 2020 Tokyo Olympic Games,” Kei Sumiyoshi of JLL Hotels & Hospitality Group said. With this demand, Sumiyoshi expects transactions between buyers and sellers to increase significantly, a turn from the past year when there was a shortage of hotels for sale, making it difficult for investors to access the market, Sumiyoshi said. This is likely to change, he added, as investors start selling hotel assets in their portfolio, creating a bit more liquidity in the market.

“Asian investors led by China remain keenly interested in hotel investment,” he added. As do other foreign and domestic companies who will be competing for the assets, he said. “Japanese investors, such as developers and railway companies, are actively entering the hotel investment market along with overseas investors.” What’s more, Sumiyoshi expects both foreign and domestic companies to fight over the assets, which could trigger a bidding war.

The Value of Japan’s Hotels

Investors have good reason to snap up Japanese properties as they become available. Hotels in the country account for 28 percent of tourist spend on average, second only to shopping. As recently as last November, revenue per available room at five-star hotels in Tokyo was ¥47,756 (USD$436), an increase of 5.8 percent from the same period the year prior. The Japanese government is taking steps to keep the numbers growing, with a goal of 40 million international visitors in 2020 and 60 million by 2030. These steps include the possible legalization of casinos, relaxing visa requirements, repair and maintenance of 200 cultural assets across Japan and implementation of multi-language services.

Airlift Factor

If Japan expects to get 40 million visitors in 2020, it will need to expand its airlift capacity. As such, Japan Airlines, the nation’s flag-carrier, is establishing a new low-cost brand for the international market with medium- to long-haul flights. The company will be a consolidated subsidiary of the JAL Group and plans to operate flights from Narita International Airport to Asia, Europe, and the Americas.

In the first stages of its establishment, the carrier will operate two Boeing 787-8 aircraft and is targeting to launch commercial flights from the summer of 2020 when Narita Airport completes enhancements to its facilities—just before the Olympics begin. JAL will invest 10 billion yen to 20 billion yen ($91.44 million to $182.88 million) in the business, with the aim of reaching profitability within three years from the launch, the company said. “Full-service airlines typically have high costs, but in Japan this is especially so,” Will Horton, senior analyst at research consultancy CAPA Center for Aviation, told Reuters. “Japan needs new platforms to capture foreign visitors. They are not like the Japanese who are sticky in wanting to fly a costly Japanese full-service airline.”

 

(Source – Hotel Management, Pic – Hotel Trinity Lobby, Sapporo / “David McKelvey“)

Japan Maintains Position as Second Largest Real Estate Market in the World

Investment Properties Japan

Real Estate Investment Japan

24 Jul, 2018 –

The global real estate investment market increased by more than a trillion dollars in 2017 as favourable foreign exchange effects and capital-value growth helped lift the market’s size by 15%. According to the annual MSCI Real Estate Market Size Report, the real estate investment market was up from $7.4trn in 2016 to $8.5trn in 2017.

The report – which estimates the size of the professionally managed global real estate investment market – stated that, due mainly to currency appreciation, the UK and Germany increased by more than $100bn in 2017. During the period, the euro rose 14% against the US dollar, the report said. The British pound also had a 9% boost against the dollar, whereas, in 2016, the pound depreciated by 16% as a result of the Brexit vote.

Capital-value growth and new developments in the market, such as new construction and sale-and-leaseback transactions, also contributed to the growth in market size. Jay McNamara, the head of real estate for MSCI, said: “While currency fluctuations have undoubtedly impacted relative weights of countries within the index over time, capital-value growth has also been a long-term feature driving the shape of the market today and many countries showed positive capital value growth in their local currency in 2017.

“Additionally, it is important to remember the impact that the global financial crisis had on the landscape we see today. Both the UK and the US suffered from substantial negative capital growth. Currently, the absolute market sizes of these two countries has increased by 40% and 70%, respectively, from their lowest levels recorded during 2008 and 2009.”

This has not been the case in all markets globally, McNamara said, adding that Japan’s market size, for example, is still below its 2009 level despite rising in each of the past three years. The US remained the largest market in 2017 as it added $244.5bn to its size to reach $2.97bn but saw its weighting decrease after seven successive years of increases. Japan and UK maintained their second and third positions at $798bn and $720bn, respectively.

The report said Germany replaced China as the fourth-largest market. Germany gained the position with a market size of $520bn overtaking the world’s most populous country which had a $482bn market size.

(Source – “IPE Real Assets“, Pic – Blue Hour Over Tokyo / “Balint Foeldesi“)

Record Breaking Tourists Push Up Japan’s Land Prices

Japan Investment Properties

Japan Real Estate

11 July, 2018 –

TOKYO — A growing flood of visitors from overseas and numerous new urban redevelopment projects continued to drive demand for land in Japan, which propelled prices upward for the third consecutive year in 2017, the National Tax Agency said Monday. A plot in Tokyo‘s Ginza shopping district was the most expensive land in Japan for the 33rd straight year, and prices rose sharply in other tourist destinations and downtowns popular with foreign visitors, including Hokkaido’s Niseko ski resort, Kyoto and Okinawa.

The nation’s foreign visitors totaled 28.7 million in 2017, breaking the previous record, and the number has been increasing so far this year at a pace that could see it once again shatter the record by the end of this year. Domestic and foreign investors alike are pouring funds into areas where hotel and other development projects are underway. This is pushing up land prices, but it is also making some locals uneasy.

Tokyo saw a hefty 4.0% rise thanks to demand related to the 2020 Olympic and Paralympic Games. A plot in the capital’s Ginza shopping district was assessed at 44.32 million yen ($400,000) per square meter, the national record for the 33rd straight year. Some analysts expect the capital’s average land price, which has risen for five years in a row, to peak ahead of the Olympics.

The Hokkaido resort town of Niseko, well-known internationally as a ski resort, and which includes the towns of Niseko and Kutchan, accommodated 433,000 foreign visitors in the year ended March 2018, almost 30 times its resident population of about 15,000. In particular, the price of land along Niseko-kogen Hirafu-sen Street rose 88% from a year ago, the fastest-appreciating land nationwide. Tokyu Resort, a Tokyo real estate company specializing in resort properties, set up an office in Niseko at the end of last year to bolster sales activity in the area. The company said wealthy customers in Singapore, Hong Kong and Taiwan tend to show interest in condominiums priced at over 100 million yen near ski hills.

“Land prices and apartment rents are rising nonstop. We’ve been seeing an abnormal bubble in the past few years,” said a women’s clothing shop operator in Kutchan, sounding alarmed at the continuing rise in real estate prices in his area. “It’s good to see some growing activity, but you never know how long this is going to last,” said the man in his 60s. “I’m also worried the tax burden may increase.” According to the agency’s annual report, the increase in Japanese land prices as of Jan. 1 was 0.7% on average from a year earlier.

Kyoto Prefecture as a whole posted a 2.2% rise. In particular, land prices on Shijo Street in the Gion entertainment district in Kyoto’s Higashiyama Ward ascended 25.9%, scoring the second steepest rise in Japan for the second consecutive year following last year’s 26.2% increase. The shopping street leading to Yasaka Shrine is home to numerous duty-free shops and is crowded with tourists from abroad. “Shops here have frequently changed over the past three years,” said a woman in her 70s operating a local food store founded more than 100 years ago. While plans to open stores along the street have been increasing sharply to take advantage of the inbound tourism boom, “land plots offered for sale are limited in number compared with those in Osaka and other places,” Takumi Moriguchi, a real estate appraiser, said. “Squabbles about land in commercial districts are expected to continue.”

Meanwhile, Okinawa saw an increase of 5.0%, the sharpest of all the prefectures. Okinawa keeps attracting tourists mainly from Asian countries. The number of visitors to the prefecture from abroad in fiscal 2017 increased 26.4% to 2,692,000, setting a record high for the 10th consecutive year, according to the prefectural government. In the central section of the prefectural capital Naha, land prices along Kokusai Street, which is filled with souvenir shops, restaurants and other businesses, climbed 10.4% year-on-year.

Y’s Cabin & Hotel Naha Kokusaidori, which opened in late May, has added information in Chinese and Korean to its website. The hotel is developing programs to attract tourists during the coming tourism season in cooperation with Taiwanese and South Korean companies, an official said. Many hotels are expected to begin operating in the area along the road. The official said, “We want to attract as many foreign visitors to Kokusai Street as possible.”

 

(Source – Nikkei Asian Review, Pic – Tokyo / “Glen Darrud“)

High Occupancy Ratios Driving Up Investment Activity into Tokyo’s Office Buildings

Japan Investment Properties

Japan Real Estate

25 Jun, 2018 –

Tokyo overtook London as the world’s busiest real estate market in the first quarter of 2018, with mega-deals and an unusually positive economic outlook driving demand. Investment volumes in the Japanese capital more than doubled to US$9.1 billion in the three months to March (2017: US$4.3 billion), just beating New York (US$9 billion) and way ahead of third-placed London (US$5.9 billion). Global deal volumes rose 15 percent to US$165 billion, making the start of 2018 the biggest quarter for commercial real estate deals since 2007. Asia Pacific transactions rose 34 percent to US$40 billion.

“On the one hand, sellers are increasingly focused on the slowing rental growth due to expected new office supply, and on the other, high occupancy ratios in existing buildings are driving transaction up volumes,” says Manabu Taniguchi, Research – JLL Tokyo. Tokyo will see substantial office construction between now and 2020, which is expected to depress rental growth. But in the short term, rents are still rising (1.8 percent in the 12 months ending April) and Tokyo’s overall office vacancy rate is only 3 percent. Japan saw 1.8 percent GDP growth in 2017 and unemployment is down to a record 2.5 percent, which bodes well for future office demand.

Furthermore, despite rising prices, Tokyo Grade A office capital values are 27 percent below the previous cycle’s peak in 2007, according to research by DWS. The office yield spread — the difference between the office capitalisation rates and ten year bond yields — remains attractive at 2.9 percent in Tokyo, compared to 2.7 percent in London or around 1.7 percent in New York, DWS said.

A big quarter generally comes with big deals and this was no exception with the sale of Shiba Park Building, known as the ‘Battleship’. This 1 million square foot, 14-storey office building was sold to a joint venture between utility companies Kansai Electric and Tokyo Gas for around JPY150 billion, or close to US$1.4 billion. This makes it one of the largest single asset deal in Japan’s history. The building was sold by a consortium of foreign investors, comprising PAG Asia, CV Starr and Asia Pacific Land, which bought it in 2013 for JPY120 billion (US$1.2 billion at that time) after the collapse of owner daVinci Holdings.

Domestic investors were very much at the fore in the first quarter; foreign buyers accounted for only 17 percent of transactions, JLL research shows, compared with 26 percent for the whole of 2017. Japanese real estate investment trusts (J-REIT) were also more active, Taniguchi explains. “Listed REITs prices have stopped falling so J-REITs gained momentum, backed by improved fundraising conditions. Rebalancing of portfolios in time for the fiscal year end among REITs also contributed to investment activity.”

At the same time, outbound investment by Japanese investors fell sharply to US$240 million in Q1, after substantial outflows of US$34 billion in 2017 (up 70 percent on 2016). “However, pension funds and other institutional investors will maintain acquisition interest in overseas markets and major developers, trading companies, and private funds will continue to seek opportunities in overseas properties,” says Taniguchi.

He expects Tokyo and other major Japanese cities to maintain investment activity for the rest of this year, with national investment volumes set to increase 5 to 10 percent from 2017 to JPY4.3-4.5 trillion.

(Source – “The Investor”, Pic – Tokyo 756 / “Tokyoform“)

Owning a Japanese Ski Holiday Property

11 Jun, 2018

Winter Is Coming

Japan Properties

Japan Real Estate

Japan is internationally renown for having some of the world’s best winter sports’ hotspots – according to “Snow Japan”, one of the leading English language Japanese winter sports web portals, there are currently about 500 places to ski and snowboard in Japan, ranging from huge mega-resorts to tiny local ski hills. Additional factors, like Japan’s extra dry powder snow (often considered the driest in the world), and over 25 years of deflation, which have brought prices down significantly as far as overseas visitors are concerned, all add to the attractivity of a ski holiday here – as does the opportunity for sampling some of the world’s most exciting cultural properties, cuisine, and omotenashi – the Japanese un-paralleled service and hospitality philosophy. Oh, and let us not forget – the onsens (natural hot springs) that dot the mountainside all around the country – there’s arguably nothing that beats soaking in a hot mineral bath at the end of a long day on the slopes – and most self-respecting Japanese snow resorts would have at least one of these treats on site or in close proximity to accommodation facilities. For countries lying on or close to the same time zone, there’s also the added value of little to no jetlag.

For those enthusiasts among us who frequent Japan’s ski resorts on a regular basis, whether living in Japan or abroad, the cost of accommodation can be quite steep – particularly if attending with family in toe. Even the cheapest accommodation available would normally start at 6,000 JPY per person, per night – with most of them averaging 8-9,000 or more. As a result, a winter resort holiday of just 2 weeks a year for two people, would cost approximately 230,000 JPY – just over 2,000 USD at current rates. Add even a single child to the mix, or extend the holiday by even a day or two, and it already becomes profitable to own your own private ski property, somewhere near or even a bit far from the slopes. This makes even more sense if you’ve got a larger family, or if you regularly travel with a group of like-minded friends – and, of no less importance is the option to design, furnish and otherwise tweak your accommodation to your heart’s desire, so that you’ve got the ideal annual retreat decked up exactly the way you like it, with all possible creature comforts included. Booking issues, which sometimes occur at high season in some of the more popular resorts, also become a thing of the past once you have your own home away from home.

 

Where to Buy?

The obvious answer to this question would be, of course – “close to your favourite resort, if possible”. But of course, the biggest and most famous resorts can be quite pricey (actually not necessarily, but we’ll get to actual prices a bit further down the track). Fortunately, there are plenty to choose from – again, from “Snow Japan”, here is the list of Japanese prefectures hosting ski resorts and their numbers – Aichi (1), Akita (23), Aomori (12), Ehime (3), Fukui (7), Fukushima (24), Gifu (24), Gunma (24), Hiroshima (14), Hokkaido (104), Hyogo (16), Ishikawa (7), Iwate (19), Kochi (1), Kyoto (3), Miyagi (10), Miyazaki (1), Nagano (86), Niigata (56), Oita (1), Okayama (7), Saga (1), Saitama (1), Shiga (8), Shimane (4), Shizuoka (2), Tochigi (5), Tokushima (1), Tottori (6), Toyama (8), Yamagata (21) and Yamanashi (3). Plenty to choose from. Naturally, smaller and less international renown resort towns would have less English oriented services and staff, and not all resorts are created equal as far as diversity of activities and number of courses go – but a bit of research and an open mind will help you find some hidden gems that may be perfect – and affordable – for purchasing your own private winter wonderland holiday home.

 

Prices, Perks and Caveats

The afore-mentioned 25 years of deflation created the perfect buyers’ market as far as ski homes are concerned. While the sky is the limit, and multi-million dollar, cutting edge architecturally designed family chalets do exist, particularly in the more popular mega-resort locations, there are also plenty of properties that are practically being given away, mostly by retirees who no longer use them, and want to stop paying the often high monthly resort maintenance and upkeep fees that are charged monthly. These fees make up the most important part of the due diligence process. Generally speaking, stand-alone landed properties tend to be pricier (although not in all cases), but carry little, if any, monthly fees – whereas villas and apartments located inside existing resorts can involve monthly fees of anywhere from 50 to 300 USD per month. Keeping the estimated costs of renting accommodation on a per-night basis in mind, do your research, or enlist the services of a buyers’ agent to do that for you, and make sure the exercise is worth your time and funds. Some properties will cost close to nothing – say, 1,000-2,000 dollars – to buy, but then carry hefty monthly fees, while others will cost a bit more – 10, 20, or even hundreds of thousands, in case of a perfectly located and built landed home property – but have almost no fees to speak of post-purchase.

Another important factor to consider is the distance to the slopes. While the pricier and more heavy-maintenance properties will be a few minutes walking distance from the courses, others that may seem further away, may actually be easily accessible via shuttle bus or ski lift. Some resorts offer heavily discounted prices for the use of these lifts or buses, as well as free or extremely affordable daily onsen, heated swimming pool and/or other facilities tickets to owners and their accompanied guests, which is another pricing factor to consider. Tangram circus ski resort in Nagano, for instance, where there are apartments available for purchase for as little as a few thousand dollars, and monthly fees are a relatively comfortable 100-150 dollars per month, provide 10 USD daily ski lift passes, which is an absolute steal – and there’s a ski lift station located only a few minutes outside the resort door.

Lastly, and this applies to any type of apartment purchase in a co-owned condo, and not necessarily only to holiday properties – you’ll want to carefully review the building’s renovation history, and the status of the reserve fund pool, to ensure there won’t be any unpleasant surprises which may end up costing you more in sharp monthly fee hikes or one-off payments, just to cover for repairs and renovations if the funds pool is depleted for any reason.

 

Guests and Renters

While there are plenty of absentee owners who advertise and try to lease out their properties to other holiday makers when not in use, most resort management companies actually forbid this practice – and the latest national legislation passed, which will come into effect from 15 June 2018, also prohibits these practices on a more sweeping scale – so it is highly advisable not to run afoul of these laws and bylaws, and to simply treat your ski property as a lifestyle choice, rather than an investment or money-making vehicle. When you ARE in attendance, however, you will usually be able to bring friends and family members along who will be staying with you – although some resorts will charge a small daily fee for any extra guests beyond those registered as immediate family members – this, as well, is something that you’ll want to confirm before deciding on the property you’ll be purchasing.

 

Local Representation

In many cases, the best deals on winter holiday properties would be those which involve purchasing a relatively cheap and outdated property, and then furnishing and renovating it, as mentioned, into your ideal home away from home. If you’re a DIY enthusiast, or if you’re living in Japan and have the time and language skills to research and manage this process on your own, you’re in luck. However, if you’re residing out of Japan, or do not have the time and language skills required, you’ll need someone to do this for you. And, while there are a few English-speaking service providers who can assist in this regard, they’ll usually be available only at high entry levels, or only in the biggest and most internationally famous resort locations. If your property is anywhere else, however, or if you just want access to more affordable and versatile service providers, it’s a good idea to hire the services of a management company which can facilitate these services on your behalf. This will involve researching, contacting and getting quotes from a few local providers who can take on the project with a good track record and affordable prices, shopping around and sending you pictures of potential furniture and other trappings for you to approve, and coordinate the work with resort management, who will most likely have some regulations as to what can and cannot be done, and at what days and times – also to allow the renovators entry when they’re arriving to do their work.

In short, you’ll need a local representative to act as your proxy in these cases. It’s not a bad idea to also have this local rep handle your financials, since non-resident foreigners cannot normally open local bank accounts, and Japanese service providers wouldn’t be able to handle communication in other languages, receive or send funds overseas, and otherwise handle overseas clients. This rep should also be able to provide you with a Japanese phone number and postal address for communication with building management, tax authorities, and other third parties you may need to be in contact with over time. Of course, it would help if they also know the market at least a bit, so they can also provide some good advice along the way – although you’re very unlikely to get cheated or screwed over in Japan, there are of course better and worse service providers, as in any country.

In case you’re splurged and purchased a stand-alone landed property, your local rep should also be able to assist you in contracting and facilitating the service of local maintenance folk who should be able to perform basic maintenance, repairs, or just to clear the snow off your property in preparation for your imminent arrival, and ensure that you are able to enjoy your winter holiday from the first to last day, without having to worry about any annoying tasks that have built up through the year in your absence.

Happy skiing!

(First Published in  – “Plaza Homes“, Pic – Tokyo Office Buildings / “Roderick Eime“)

Japan’s Old Houses to be Transformed to Vacation Rentals

Investing in Japanese Properties

Rebuilding Japanese Properties

05 Jun, 2018 –

Japanese property startup Rakuten Lifull Stay Inc. has concluded an agreement with Austin-based HomeAway and Japan’s leading traditional house regeneration association. The agreement aims to transform private vacant houses as accommodation properties and promote them among domestic and inbound travelers.

Tokyo-headquartered National Old Private House Revitalization Association will certify old private houses as secure and safe, in line with its 20-point appraisal checklist. Rental listings will then be tagged with a “certified traditional house” logo. The association has more than 60 offices nationwide.Under the partnership, the three will use old private houses as property for vacation rentals.

These are preferred by tourists because of their cultural and historical affinities, according to a news statement. There are around 1.28 million old housing units across the country. Since the average lifespan of a traditional Japanese home is 30 year — as opposed to 100 years in Europe and the United States — they need to be recycled to make them livable for a longer period.

Inbound tourism has been growing significantly in Japan; encouraging property businesses to enter the vacation rental business. The industry is waiting for a new law that will allow private rental services for short-term accommodation, to come into effect. It’s expected to come into play later this month.

Rakuten Lifull Stay Inc., which is co-owned by Rakuten Inc. (51 percent) and Lifull Co. Ltd. (49 percent), is also waiting to launch its guest house booking site VacationStay and monthly rental property site MonthlyHomes. HomeAway, which is owned by Expedia.com, is one of five vacation rental marketplaces Rakuten Lifull Stay has signed listing-sharing accords with. The other four are South Korean Yanolja, Taiwanese AsiaYo.com, Beijing-based Tujia.com and Amsterdam-based Booking.com.

The number of foreign tourists in Japan rose 12.5 percent year-on-year to 2.91 million in April, according to the Japan National Tourism Organization’s data. The nation’s biggest real estate classified in terms of traffic, Suumo.jp, also entered the vacation rental market in January by signing a listing-sharing agreement with U.S.-based rental apartment site AirBnB.

(Source – AIM Group, Pic – Old Houses / “Fred Hsu“)

High Demand for Japanese Short-Term Rentals Despite Local Government Restrictions

Japanese Investment Properties

Japan Real Estate

21 May, 2018 –

RENTAL platforms like Airbnb are hoping for a boost from a new law coming into force next month in Japan ahead of an expected surge in demand for the 2020 Olympics, but experts warn it could actually hamper business in the short term. Currently, anyone renting out a room risks falling foul of the law but short-term rentals will be legalised on June 15, clearing up a legal grey area. But the new law also introduces fresh restrictions, dismaying many who rent out rooms to tourists via Airbnb or similar platforms.

Would-be renters will have to register their lodgings with the authorities and the new law limits total overnight stays to 180 days per year. The new legislation allows local authorities to impose their own restrictions too. The tourist-magnet of Kyoto, for example, has said it will only permit rentals in residential areas between mid-January and mid-March, the low season for tourist arrivals. Jake Wilczynski, Airbnb spokesman for Asia-Pacific, said that the new laws are a “clear sign that Japan is buying in to the idea of short-term rentals for individuals”.

But many have cancelled reservations or simply taken their lodgings off the platform. “Under the new law, Airbnb hosts will not be able to accommodate guests as easily as before. I hope this doesn’t put the bar too high for us,” said 41-year-old Nobuhide Kaneda, who rents out a room in Tokyo. On an Airbnb discussion forum, an Australian host identifying herself as Narelle wrote: “I am … becoming frustrated that no one knows what is required. I also feel the three-month timeframe to organise a notification number is unrealistic.”

Airbnb does not say how many properties on its platform already comply with the new laws but does not deny there have been some teething problems. Mr Wilczynski said the firm was “in the process of discussing the issue with the Japanese Tourism Agency“. “We are waiting for instructions,” said the spokesman for Airbnb, which has informed its members of the legal changes.

Despite the new restrictions, there is a huge potential market for short-term rentals as the country gears up for Tokyo 2020 and the 2019 Rugby World Cup. Airbnb rentals have boomed in recent years, driven by an increase in tourism and a surprising lack of hotel infrastructure. With around 60,000 listings, Airbnb dominates the Japanese vacation rental market, even though it lags far behind many countries in Europe – France, for example, has 450,000 listings. And demand is poised to rise as Japan targets an influx of 40 million visitors in 2020 when it hosts the Summer Olympics – up from 29 million last year.

Yasuhiro Kamiyama, CEO of Hyakusenrenma, a local firm that manages 2,000 private rentals, said the new law will begin to “normalise Japan’s Airbnb market”. He hopes to have 30,000 rental properties on his books by 2020. Mizuho, a research institute, said that “vacation rental services are unlikely to rapidly expand after (the law’s) introduction. But the potential needs are great among foreign tourists, particularly from Asia.” However, the loosening of the law will also open the door to fierce competition.

E-commerce giant Rakuten is planning to launch a property rental site as soon as it comes into effect and telecom group KDDI has also set up a reservation platform. Hotel chains will also be stepping up their game, building new sites to counter “the risk of a shortage” come 2020, according to a recent research note from Mizuho.

An additional problem faced by potential hosts is opposition from neighbours, who worry about noise from holidaymakers or security. According to Japanese media, there have been several cases of management companies or co-owners banning sub-lets in their buildings. Soichi Taguchi, a Japanese tourism official, said the new laws were “urgently needed to ensure public health and prevent trouble with local residents“.

But Airbnb called such incidents “extremely rare”, and Hyakusenrenma’s CEO said “all the problems have stemmed from illegal rentals because neighbours did not know who was operating them”. In a bid to overcome such local difficulties, some platforms offer extra services to manage rentals, such as providing the welcome to guests, handing over keys and showing them around the property. Airbnb has forged a partnership with a service provider which registers properties with local authorities, and arranges wireless internet and cleaning after the rental.

(Source – The Business Times, Pic – Apartment Share House / “JAPANKURU“)

Understanding Japan’s Counter-Intuitive Real Estate Market

Investment Properties Japan

Real Estate Investment Japan

02 May, 2018 –

You may think real estate investing is solely about property growth as you would find in Australia, U.K. US, Singapore and similar markets. The Japanese property market is not ripe with prospects for increased property value. So, why then is the market saturated with foreign investors?

Creating Opportunities Beyond Capital Growth

The Japanese property market suffered at least 25 years of declining/flat-lining prices. Although capital growth made a quiet entrance from 2012 to 2016, it was too soon to for investors to comfortably speculate growth. Instead, investors found a new opportunity. Because of the decline, properties became quite affordable while rental rates remained stable. The result, steady and higher yields across Japan— the ideal cash flow market from high yield rental income.

To put it in perspective, for as little as USD $30,000 at 7.5% yield net pre-tax investors can earn monthly rental income of approximately $170/month. As an added benefit, in a prime location you might also gain property value, but that is not the focus of property investing in Japan. This market is about common sense investing without the speculative nature.

Overcoming the Language Barrier

This is not your typical internationally friendly business market. On one hand, you will experience the most reliable and honest professionals in Japan, while on the other, foreigner-shy professionals who likely cannot speak English. Furthermore, to invest in Japanese properties you will need a local address, phone number and a local bank account, impossible without communication and cooperation. To get around this barrier, savvy foreign investors use a trusted local Japanese/English speaking proxy or representative to act on their behalf for both communication and access to the required information.

Understanding Old Structures

Some novice investors shy away from the Japanese property market believing with a huff and a puff, structures could be blown down. It is true that structures built before 1981, including smaller steel-frame buildings, and even wooden frame houses, were not built to last and require major renovations and repairs over time. However, a major change to the Building Standards Act for earthquake resistant construction methods for buildings (reinforced concrete blocks) occurred in 1981. This became the turning point that investors often looked to when purchasing property. That being said, there is still a niche market for older properties because of the higher yield. In truth, regardless of age, with due diligence, if the property has proof of regular maintenance, renovations, repairs to the interior and exterior, as well as sufficient funds for ongoing repairs, and is tenanted, an older higher yielding property could prove to be a diamond in the rough.

Accepting Foreign Real Estate

Today, the best real estate opportunities do not have to be in your own back yard. JPMorgan Chase says the Japanese real estate and infrastructure is becoming more attractive particularly with no more than 50% of leveraged funds. Above that, real estate doesn’t become the driver, but the leverage becomes the driver of your return.

Japan provides opportunities for stable, monthly cash flow from rental income with yields from 5% to 11% net pre-tax. Add to that, currency exchange and the yen’s role as a safe-haven currency and it’s easy to see why this is a booming market for foreign investors, contrary to the standard real estate investment approach.

(Source – “Priti Donnelly“, Pic – Blue Hour Over Tokyo / “Balint Foeldesi“)

You Asked Us – Can Foreigners Buy Shops in Japan?

Japan Investment Shops

Investment Shops Japan

18 Apr, 2018 –

Following our last piece in this series, which detailed statistics and strategies to profiting from shops and other retail properties in Japan, we received the following question from a reader –

Q: How easy or difficult is it for foreigners to enter the retail scene in Tokyo, in terms of buying units at shopping malls or other commercial lots? Is there a glut of retail space in Tokyo? If so, are there any bright spots eg. niche or high-end or themed malls? 

A: While there is nothing that limits non-resident foreigners from buying any property in Japan (aside from very specific, cultural heritage or agricultural properties) – there’s a big difference between commercial units in otherwise residential of mixed purpose apartment blocks (street shops) – as opposed to wholly commercial buildings or shopping centers (malls and department stores). While ground floor shops or offices in a mixed purpose building can be purchased by anyone, similar to a residential property, and then leased out to business owners – the situation is quite different with wholly commercial blocks, which are normally entirely owned by a single, licensed operator. That operator runs the entire complex, and provides utilities and services to its entire renter community.

Investing in Shopping Centers

In the latter case, business operators would be required to apply to the building or centre management if they wish to lease shop or office space – those spaces would normally only be available for renting, and not for purchase individually. The operator, on their part, would be required to provide certain services such as infrastructure, in-house advertising space, floor and building maps references to the business, daily or weekly rubbish disposal, etc. While it is definitely possible for foreign investors to purchase and run an entire commercial space structure, and while there are management companies who will be able to then operate the center on your behalf – this of course adds an entirely new layer of complexity to the investment, which becomes more than a simple real estate and rental management transaction. In effect, you will now be running a fully pledged business operation, which would often require hiring, providing for and training of staff, out-sourcing of advertising, stock management, etc. The closest equivalent is probably purchasing and running a hotel or other guest or short term stay accommodation business, as opposed to “straight out” real estate property investment.

Where to Buy?

As for attractive locations – there are plenty of those, in Tokyo and beyond. While traditionally, spots located within walking distance to the JR Yamanote line (Tokyo’s central “circle” train line, which runs in a loop around its main suburbs) were all considered its prime business locations, these days the profitability map has expanded far beyond it, as new and attractive suburbs are being developed and re-developed regularly. Additionally, areas around Tokyo, such as Chiba, Yokohama and Kawasaki are also highly desirable – as are various areas in Japan’s other big cities, such as Osaka, Nagoya, Sapporo, Kyoto, Fukuoka, to name only a few. In fact, when considering the reduced purchase prices in other cities, percentage yields tend to be higher out of Tokyo, as they are in all Japanese real-estate property investment market sectors.

(Source – Ziv Nakajima-Magen, Nippon Tradings International”, Pic – Investment Shops in Japan / “Ziv Nakajima-Magen“)

 

Municipalities and Condo Associations Call the Shots on Japanese Short-Term Rentals

Japan Real Estate

Japan Short Term Rental Property

10 Apr, 2018 –

A new law will go into effect in June to regulate minpaku, private residences rented out by their owners as short-term lodgings. To most, the new law will address changes that have occurred in recent years due to the rise of Airbnb, the worldwide online service that allows travelers to book rooms in private homes directly from the owners of those residences.

Japan has long had a similar type of system called minshuku, which usually involves rooms in private homes that are offered as lodging. But people who want to let rooms as minshuku must apply for a license, which requires that the room be a certain size. Also, a management-type person must always be on the premises. These rules, however, have never been strictly enforced, which is why Airbnb was able to gain a foothold in Japan, even though, technically, such rentals are illegal.

The new minpaku law will lower the legal hurdles for renting out properties as short-term lodgings. Currently, only certain specially designated districts allow minpaku rentals, but after June 15, in principle, minpaku rentals will be permitted throughout Japan. There will no longer be limitations on room size. Nor will representatives of owners be required to be present on the premises. Local governments, however, can also implement their own restrictions and conditions. Kyoto, for instance, will mostly prohibit minpaku from being operated in residential areas.

One of the new conditions of the law is that people who wish to rent out properties as minpaku must register with the land ministry. In fact, the ministry is already accepting registrations, so presumably owners can start renting out rooms when the law goes into effect. Probably the most contentious aspect of the new law is that it contains no restrictions with regard to the type of property that can be used.

One of the main sources of complaints about Airbnb rentals has been condominium owners and tenants who object to neighboring units being used as de facto hotel rooms without their approval. The new law will not expressly address this problem, but the land ministry has drawn up guidelines for owners associations that wish to ban minpaku from their buildings. The problem is that the law was only written four months ago, meaning few owners associations may know about the guidelines.

Associations can ban minpaku, but after June 15 they must include any prohibitions in their own sets of rules and regulations, otherwise they will not be legally binding. And according to the law, since associations must gain three-fourths approval of their voting members to amend their rules, adding such prohibitions could be difficult. Presently, under the special district rule, minpaku can still be banned by condo associations without any kind of formal declaration in writing.

Consequently, the new minpaku law could exacerbate well-publicized existing problems associated with Airbnb properties, such as garbage being thrown out on non-designated days, visitors staying up all night and making lots of noise and, most significantly, loss of security. Many modern condos have auto-lock systems that require residents to first use a key or key code to enter the building and then another key or key code to enter units, the point being to keep non-residents out of the building unless a resident is there to give allow entry.

This situation will become more of an issue because many minpaku owners don’t live in the buildings where they have rooms. In Osaka, for example, two-thirds of Airbnb owners are non-Japanese who don’t live in the country. There are, for example, Chinese real estate companies that sell Japanese condos to Chinese investors and then manage the units as minpaku. The owners may never even physically see the unit they bought. The new law will also do away with a current minimum-stay rule, which states that a person must stay at least two nights in the rented property. (Previously, it was six nights.) However, if owners don’t live in the building where they rent rooms, they will be required to hire a management company to take care of the property.

This condition will make it more difficult for owners to make money, since some management companies take as much as 70 percent of the rental fees for themselves. If owners simply want to rent out rooms to pay for property taxes and mortgages, what remains may be enough, but another new rule says that they cannot rent out a room for more than 180 days in a given year, which will further limit potential profits.

Despite this, landlords having trouble keeping long-term tenants could find the minpaku business more financially rewarding, since they can charge more on a per-night basis. The government is thus hoping that minpaku can alleviate some of the problems associated with the growing number of vacant houses and apartments in Japan, many of which are available for renting but stay empty for long periods of time due to the dwindling number of renters.

More and more housing portal sites on the internet will likely offer minpaku. On March 15, the real estate site Apaman, which represents 200,000 property owners and landlords, registered itself as a management agency for minpaku. The proliferation of such portal sites, however, could cause regulatory problems. If a property is offered on more than one site, it may be difficult for the portals to keep track of how many days the property has been rented out, meaning the owner could end up going over the yearly 180-day quota. The new law will slap a ¥1 million fine on violators — if they are found out, that is.

The main merits of minpaku are to the customer. Minpaku are usually cheaper than hotel rooms and there is no limit as to how many people can stay in a unit. Hotels, of course, are not happy with the new laxer law, and will be even less happy after the present tourism boom deflates following the 2020 Tokyo Olympics.

Right now, the hospitality industry is busy creating more hotel rooms for the Olympics, which means there could be a glut in the future. Minpaku may aggravate the problem, but we really won’t know until the new law goes into effect.

(Source – The Japan Times, Pic – Apartment/House / “Michael Coghlan“)

How to Profit from Japan’s Retail Market?

03 Apr, 2018 –

Retail Heaven

Japan Investment Property

Japan Retail

According to JETRO (Japan’s governmental external trade agency), Japan boasts the world’s second largest retail market, with a sales value exceeding US $1,3 billion (150 trillion yen).

Being a mature, quality and luxury oriented consumer market, the country has been a natural destination for any and all global brands seeking to establish their presence in Asia for many years, with spectacular results. 35% of Asian tourists from countries such as China, Taiwan, Hong-Kong and South Korea, who are traveling to Japan, cite their main reason for visiting as “shopping”. Local Japanese shoppers are also a force to be reckoned with – often labelled as “obsessed with consumerism culture”, for better and worse.

Key sectors in the country’s retail market are high-end specialty stores, apparel specialty stores, and lifestyle/environmental products – all of which are readily available not only in shopping hot spots such as Tokyo’s Ginza, Omotesando, Shibuya and Shinjuku, but all over the country, in other large metropolitan centres such as Osaka, Nagoya, Fukuoka and Sapporo, to mention only a few.Shopping malls, supermarkets and street shops are bustling with activity during all hours, fashion is a major driving force for men and women alike, and even the two “lost decades” of deflation, which the country has only recently broken out of, did not seem to diminish the Japanese passion for shopping – as a walk down the street down any of these major shopping districts would have demonstrated at any point in time during those years.

 

Current Retail Status

As the graph above, taken from Mitsui Fudosan’s 2016 statistics publication shows, total retail in Japan is generally on the rise, aside from a small slump, due mainly to a sharp drop in Chinese tourist numbers between 2008-2015 (as a result of increased import duties in the mainland).

Two interesting main trends evident from that same graph, are the following –

1.      Supermarket shopping has long surpassed department stores as far as total retail sales numbers are concerned, and is likely to remain so. This trend has further intensified in 2017, as clothing, goods and apparel are sold more and more online – while Supermarkets, selling consumable goods such as foods and beverages, aren’t as susceptible to online competition.

2.      The by far large majority of retail sales in the country, however, aren’t in either department stores (or “Depaato” as they’re known here), nor in Supermarkets – but in “other retail” – namely, street shops, train and subway station shops, outlet malls, and small businesses– and of course, ever increasingly – online.

The Property Investment Perspective

As explained in depth in our annual summary, rents and prices for retail commercial properties have barely budged throughout 2017, in line with general Japanese property market trends – and prime location retail rents have actually decreased in Tokyo, previously the heart of the nation’s shopping culture.

Furthermore, multiple new shopping mall projects announced in Tokyo and beyond have created an expectation for more stock to soon hit the markets, which will naturally further taper the potential for price hikes in rents and purchase prices.

The same report, however, also points to two main macro-economic indicators which are expected to continue and buoy investment in coming years –

a)      an increase in Japanese consumer confidence – now at its highest since the 2014 consumer tax hike (further boosted by the postponement of the next scheduled tax hike to late 2019)

– and –

b)     an increase in retail sales since July 2016 – with increasing tourist numbers – this trend is expected to continue until the 2020 Olympics at the least.

How to Profit from These Trends?

  • While ownership of a shopping center or mall can be an attractive investment, buying and managing such a property is an expensive exercise, and requires a Japanese presence for the purpose of running such a business, with all related aspects. Furthermore, with decreasing rents in prime shopping areas, as more and more customers turn to internet shopping – it may be far more feasible for foreign, remote investors to put their funds into smaller, “street level” commercial retail properties, which can be easily managed via standard rental leases (straight-out rental yield investment, as opposed to business management). These shops are also far cheaper, which provides investors with far better diversity and an option to hedge their investments, as opposed to investing in a single, high priced shopping centre.
  • The huge boom in internet shopping, and its expansion to the inclusion of same or next day service, has led to huge growth in the logistics real estate market (factories, packing houses, warehouses & shipping/delivery hubs) in the suburbs of most of the country’s large metropolitan centers – another sector well worth looking into. And, since this particular market is currently red-hot, with demand far outstripping supply, creative approaches such as acquisition of existing older properties erected on medium to large land-plots, with a view to demolishing and re-construction, is a highly profitable strategy.

(Source – Ziv Nakajima-Magen, Nippon Tradings International”, Pic – Shopping in Japan / “Ivan Walsh“)

 

Factors to Consider when Renting Out in Japan

Japanese Cash Flow Properties

Japanese Rental Properties

17 Mar, 2018 –

In the March – April issue of, “Asian Property Review” magazine, NTI’s Marketing Manager, Priti Donnelly shares tips to keep in mind when renting out your Japanese property.

Unlike other parts of the world where real estate investments focus on value, Japanese properties are a non-speculative investment mainly for monthly cash flow. That’s not to say there is no capital growth potential. After two decades of inflation, signs of economic progress have been quite promising, trickling down to the real estate market.

We have seen property values rise between 2012 and 2016. Since Prime Minister Shinzo Abe’s second term in 2012, the “Abenomics” plan produced significant progress in consumer confidence. Japan’s stock market almost doubled in value, increasing wealth of consumers. The yen fell by nearly one third against the U.S. dollar invigorating Japan’s export industries. Unemployment dropped. Entering 2015, Japan was positioned on an upward cycle on the back of the depreciation of the yen, partly due to a surge of tourists, and partly due to corporations relocating their production from overseas, back to Japan.  Although signs of economic progress continue to appear promising, stability is uncertain. Therefore, investors turn to Japanese properties not for speculative long-term value, but for month-to-month cash flow from rental income.

Maximize Yield

 Prior to purchasing a property, as part of your due diligence, you will have a chance to find out about the tenant’s history. If your tenant leaves earlier than expected, depending on the profile and location, it could take one to three months to repair, clean, renovate, if necessary, and re-populate. In some cases, where the location isn’t very attractive, and market conditions aren’t favorable, it could take as long as six months.

To protect yourself against the risk of extended vacancies, aim to purchase properties with the highest yield possible in a high occupancy area. If you own one or two units you would be at higher risk than holding a larger portfolio in which you can offset your losses in case of a vacancy. Therefore, for a low-risk income average, consider building your portfolio to be able to diversify your real estate assets to include properties with lower yields (6% to 7% net pre-tax) in metropolitan cities as well as higher yield, single units (upwards of 8% net pre-tax), in industrial areas or less central suburbs of the bigger cities.

Raising the Rent

 Once you own a property, you might be inclined to raise the rent for additional profit. Raising or lowering rents would not be common practice as long as the same tenant is occupying the unit. If you do raise the rent before renewing the lease, your tenant will probably not take the time to negotiate with you. Instead, he will likely move out to avoid any confrontation, leaving you with a vacant unit.

Since rent rates were higher prior to the economic downturn, some investors prefer to find properties occupied by the same tenant for several years because their rent will be higher than the current average. Until that unit is occupied by a new tenant, the rent is likely to remain the same. Keep in mind however, that when the tenant leaves, the rent would drop to the current rate, having an impact on the yield.

Term

Japanese leases are normally two years and automatically renewed unless the landlord notifies the tenant in advance. But, you will find that laws are tenant-oriented. The landlord would be required to give six months’ notice to terminate a lease, and tenants would need to provide one month. A security deposit of one or two month’s rent would be your best protection in case a tenant decided to move out mid-lease.

Small vs Large Units

Is it easier to rent out a large or small unit? The ideal location for a larger unit of 30 to 60 sqm would be in a metropolitan area where families have access to schools, hospitals, and shopping.  Larger units are harder to rent than smaller units, but once occupied, families stay for the longer term. Small units of 15 to 30 sqm are much easier to rent because of Japan’s large singles demographic. But, singles are more likely to move. Large or small…it really depends on the area, and, of course, on your budget and any other assets in your portfolio.

Age and Condition of Buildings

Some investors shy away from an older building on the assumption that if it’s old it must not be in great condition. The truth is, the condition of a building does not necessarily reflect its age. Older properties can be safe investments if they are well-maintained. While 1981 is the turning point for some investors as the year the Building Standards Act was revised for earthquake resistant construction methods, some older buildings built prior to 1981 can be retrofitted by regularly renovating, repairing and re-strengthening exterior walls to bring them up to code. The condition of a building does often dictate the type of tenants in the area — lower, middle or high income earners. Therefore, with careful due diligence on building repairs and the building’s accumulated funds, you can find a less expensive, well-maintained, older property occupied by tenants with stable income.

Short-Term Rentals

Short-term rentals, known as, “minpaku,” are becoming more regulated in Japan, especially popular in Osaka, Kyoto and Tokyo. Minpaku refers to rentals less than one month. Anything longer than that is treated as a standard rental lease. New legislative framework scheduled to come into effect mid-2018 allows owners to rent out their unit for up to 180 days a year. While short-term rentals could generate higher income than long-term leases, the caveat is, if you’re going to own an individual unit in a co-owned building, building management authorities can vote to disallow short-term rental agreements at any time. Therefore, if you are determined to rent out units on a short-term basis, a better investment would be to consider owning an entire building or a house in a popular minpaku area.

 

(Source – “First Published in ‘Asian Property Review,” Pic – Apartment Japan / “digital_studio_japan“)

You Asked Us – What Licenses, Permits, Business Visas and Taxes are Required for Non-Resident Landlords?

Japan Investment Property

Japan Real Estate

25 Feb, 2018 –

As long as a tenancy lease is made out for a period of one month or longer, there is no legislation, visas or any other complications you need to be concerned about as an owner.  There is no certification or agreement for either foreign or local landlords. Complications and hassles only arise if the lease is what’s called “minpaku”, which is defined by law as short-term leases of less than one month. For that matter, even if the tenant decides to move out mid-lease, and has stayed in the property for a shorter period of time, you would be well within your legal rights, since you made out a lease for a minimum term of one month.

Regarding taxes, you would need to legally declare your income for tax purposes, of course. Income tax is first billed in Japan, then the difference is billed in your country of residence. You might be tax free in Japan due to the low income stream in Japan, but still need to report your income in your country of residence. Your total Japanese income stream is taken into account as well as your tax situation in your country of origin. You can find the income tax thresholds on our website, here – http://nippontradings.com/taxation-information/.

As a non-resident, you would be exempt from municipal and regional taxes. However, the fixed asset tax is applicable to all property owners. For properties less than 200 sqm in size, the tax would be around 0.75% to 1.5% of the property purchase price per annum.

For specific and accurate advice, it’s best to speak to an accountant in both countries regarding tax matters.

 

(Source – Priti Donnelly, Nippon Tradings International”, Pic – Documents / “Nippon Tradings International” )