The Future of Minamisoma City, Fukushima

Japan Property Alert

Japan Investor Real Estate Watch

07 Nov, 2017 –

Fried chicken took to the skies over Fukushima Prefecture in northern Japan this week as Rakuten began drone deliveries of products from Lawson convenience stores. Forget meals on wheels, this is meals on rotors. The new free service from Rakuten’s drone business is aimed at delivering items from convenience stores to customers who find it challenging to travel long distances in order to shop. The service launched on October 31 in Fukushima’s Minamisoma City, an area that was devastated by the March 2011 Great East Japan Earthquake and tsunami as well as the disaster at the Fukushima Dai-ichi nuclear power plant that followed.

Since 2013, Lawson has been operating mobile sales points in the form of trucks that make regular visits to locations around its stores in some regional areas, thereby making it easier for customers to shop. The trucks are stocked with some 300 kinds of products, including everything from ice cream and bento lunch boxes to garbage bags and magazines, but they are unable to carry hot food. In this new service launched at a convenience store in Odaka, Minamisoma, Rakuten’s drone business addresses that problem by allowing hot food to be delivered to the mobile sale point from the store as soon as an order is received. At a ceremony to mark the service’s first flight, a local resident placed an order for fried chicken while the truck was parked at the Oya Community Center, located in a rural part of the city. Soon after, a buzzing sound was heard as the drone appeared overhead. In moments, its payload of hot chicken was delivered to the customer’s waiting hands.

Re-building with high tech

“This community has been in a weakened state, but starting with Odaka, we believe the drone and other technology can play a role in helping people who face challenges going shopping or receiving medical care,” Minamisoma Mayor Katsunobu Sakurai said in remarks at the ceremony. “My hope is that experiments with drones, autonomous driving and other technologies can lend a big push toward reconstruction following the nuclear accident.”

Sakurai became famous for his YouTube plea for help during the 2011 disaster. He has been outspoken in his efforts to rebuild Minamisoma, whose population has fallen from 71,000 before the disaster to around 57,000 today. As part of the revitalization efforts, the city in 2016 created a Robot Testing Field, in which robotics and other technologies can be developed for the monumental task of decommissioning the crippled Dai-ichi plant as well as other purposes. Other attendees also hailed the drone flight.

“It is said that this is an industrial revolution of the sky,” said Hiroshi Oikawa of Japan’s Ministry of Economy, Trade and Industry. “I am so happy that it is starting from Minamisoma in Fukushima.” “Since our founding, Rakuten aimed to empower communities and empower Japan,” said Koji Ando, Rakuten Managing Executive Officer and president of the New Service Development Company. “We would like people to get a sense of a bright and convenient future through this service.”

Groundbreaking flights

In a world first, Rakuten launched its drone delivery service in 2016, beginning with trials in which its Tenku drone brought equipment, drinks and snacks to players on a golf course in Chiba. In early 2017, Rakuten Drone partner Autonomous Control Systems Laboratory Ltd. (ACSL) delivered hot soup to surfers on a beach in Fukushima after a record-breaking flight of about 12 km. The latest version of the Tenku drone features quieter propellers and greater range compared to previous versions. It flew about 2.7 km for the fried chicken delivery, mostly following a river as it flew inland. While the service currently offers deliveries of hot products, it is planned that others will be added later, provided the drones can accommodate them. There is no extra charge for the drone deliveries.

“People here have been totally amazed by getting products from the sky,” commented Rakuten Airmap CEO Hideaki Mukai. “We would like to expand the service, while keeping in mind drone safety, as well as public acceptance. Because of the situation facing Minamisoma, people here have been quite accepting of drone flights.”

 

(Source – Rakuten.Today,” Pic – Bento Lunchbox / “Security4all“)

You Asked Us – “Can I Re-Sell my Investment Property?”

Japan Real Estate

Japan Properties

03 Nov, 2017 –

Because the Japanese property market is very active, globally second only to the USA, selling your property is a viable exit strategy. Since pricing for investment properties is generally dictated by rental yield than market trends, you can expect to sell your property for the same price or slightly higher. That is, assuming the rental rate hasn’t changed in the area. Land has depreciated over the last two decades, but the last five years have been kinder with central properties in hotspots like Tokyo and Fukuoka practically doubling. Although it’s anyone’s guess, values are expected to stay this way at least until the 2020 Olympics. From our experience, if your property is priced right, you should be able to sell it within two months.

Keep in mind though, that there are tax implications should you decide to sell your property. Foreign and local property owners who sell Japanese properties within five years can expect to pay 40% capital gains tax. After five years it drops to 20%. Therefore, as you can see, short-gains are not generally the goal. Property tax on units under 200 sqm, (which is usually the norm for most of our clients due to the higher yields involved), are 25% to 50% lower than larger properties.

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

Japan’s Short Term Accommodations Market Expected to Heat Up

Japanese Investment Properties

Japan Real Estate

11 Oct, 2017 –

Needing a place to stay before moving to a new home, James Degan recently went on Airbnb and found an apartment in Tokyo’s upscale Minato Ward. At ¥8,000 per night with a double bed and fully equipped kitchen, it came cheaper than staying in a hotel and was conveniently located near a station close to his workplace. Degan, a Franco-British financial trader, said he looked at other short-term minpaku (private lodging) sites but couldn’t find any operating in Japan with the variety offered by Airbnb.

He attributed that advantage to the service’s early entry into the nation. “I think Airbnb benefits from the innovator’s edge,” he said. An impending law change, however, could shake up Airbnb’s dominance in a market experiencing an unprecedented tourism boom. Airbnb’s success here took a similar trajectory the American firm has followed elsewhere: fighting often difficult regulatory environments and sometimes operating in legal gray zones. While Japan has no laws specifically outlawing short-term lodging services, the hotel law lays out conditions few private homes can meet.

Facing a surging number of visitors and an accommodation shortage, however, the government of Prime Minister Shinzo Abe in June passed a new law giving the green light to such services. The change brought on a roster of new players looking to play catch-up in one of the hottest areas of the sharing economy. E-commerce giant Rakuten Inc. recently announced the launch of a joint venture with real estate listing operator Lifull Co. Rakuten Lifull Stay Inc. aims to begin offering services after the law takes effect sometime in the first half of next year.

Rakuten is a household name in Japan, with 90 million members, its own professional baseball team and a platform that offers myriad services from banking and credit cards to travel and e-books. Lifull, on the other hand, operates a real estate and housing information site with around 8 million listings, and the firm has a network of more than 22,000 affiliated real estate stores. “I think it’s an ideal joint venture — Lifull can reach corporate clients while Rakuten can reach out to individual customers,” Munekatsu Ota, representative director and chief operating officer of the new company, told The Japan Times in an interview.

The venture has so far announced a series of partnerships with major players, including American powerhouse HomeAway and China’s largest vacation rental site, Tujia. Rakuten said it will supply the firms with property listings from its tentatively titled Vacation Stay minpaku service. In return, the overseas operators will drive demand for Japanese properties by promoting travel to Japan through their platforms.

Ota said his company also plans to offer property management services for hosts and said it has its eyes set on eventually working to convert the growing number of vacant homes — a product of the nation’s aging population — into lodgings. With an estimated 8 million empty houses in the country, even having a small portion renovated would lead to a boom in listings, he said. “I think we are looking at property listings in the league of hundreds of thousands,” Ota said. Hitoshi Sato, a senior analyst at InfoCom Research, said despite its global popularity, many in Japan are still unfamiliar with Airbnb and its services. “In that sense, Rakuten’s strong presence here is an asset which it can use to lure domestic property owners who may feel more comfortable working with a well-known Japanese company,” he said.

The bill passed in June will let people rent out property for a maximum 180 nights a year if lodging providers register with local governments. It also calls on absentee landlords to outsource property management to firms that can guarantee hygiene and safety. Meanwhile, service platforms like Airbnb and HomeAway will be required to register with the tourism agency, which plans to create an online system to grasp the accommodation situation at all minpaku businesses.

The push to loosen related restrictions comes as the number of inbound visitors continues to rise thanks to a weaker yen and the easing of visa requirements. Japan saw 13.4 million visitors in 2014, 19.7 million in 2015 and 24 million last year. The government wants to increase that number to 40 million by 2020, when Tokyo will host the Olympic Games. The surge in visitors has also seen travel spending swell to a record high ¥3.7 trillion in 2016. The government projects that figure to double to ¥8 trillion in 2020.

But the rosy tourism numbers are dogged by a shortage of accommodations, particularly in popular destinations such as Tokyo, Kyoto and Osaka, where room occupancy rates at city hotels exceed 80 percent. The introduction of the minpaku law could help ease that crunch by prompting players who had been on the sidelines to enter the market.

Japan’s largest travel booking site JTB Corp. last week said it is throwing its hat in the ring via a partnership with Japanese startup Hyakusenrenma Inc. The collaboration will allow visitors to JTB’s multilanguage travel booking site Japanican to access the roughly 800 minpaku properties listed on Haykusenrenma’s vacation rental site, Stay Japan. Yuki Okuno, business development manager for Squeeze Inc., a company that runs a management system for minpaku properties, hotels and ryokan inns, said businesses like monthly apartments are looking at using the law change to increase occupancy rates by filling vacancies in between reservations with short-term guests. At the same time, he said the 180-day cap and legal penalties could see some hosts opt out of the minpaku model due to risk and profitability issues.

Hosts making extra cash from listing rented apartments may not be able to turn a profit under the new law because of the 180-day cap. A revision to the existing hotel law is also up for deliberation in the Diet, possibly raising the maximum fine for unlicensed hosts to ¥1 million from the current ¥30,000. “Still, I think the overall size of the market will get bigger,” Okuno said. Spike Data, which tracks the minpaku market in Japan, estimates the sector will swell to ¥200 billion by 2020 compared with ¥13 billion in 2015 as the number of minpaku businesses and users grow.

Foreign players are also eying a piece of the pie. In announcing its partnership with Rakuten in Tokyo last month, Tujia Chief Operating Officer Yang Changle said the company is confident it can boost its presence in Japan by focusing on serving Chinese visitors through its experience and strong name recognition back home. Chinese tourists accounted for one-fourth of all visitors to Japan last year, and could reach 10 million by 2020 and 13.5 million by 2025, said Tomoko Suzuki, Tujia’s Japan head.

HomeAway, a subsidiary of Expedia Inc. that operates one of the world’s largest vacation rental sites, is also increasing its presence since opening a Japan office last year with a focus on luxury properties. Airbnb, meanwhile, has been expanding the breadth of its services beyond private rentals, embracing broader categories of accommodation, including boutique ryokan and hotels through partnerships with travel startups.

It also has the first-mover advantage, which it can capitalize on. The San Francisco-based company lists over 3 million properties in 65,000 cities in 191 countries. In Japan alone, Airbnb lists over 55,000 properties, by far the largest such provider in the nation. It began selling travel experiences like bonsai art and sake and food pairing this year, and in June launched its first television commercial in Japan. Yasuyuki Tanabe, Airbnb’s Japan chief, said he welcomed the new legislation for its clarity and simplicity, adding that Japan is the company’s most popular destination in Asia and saw 5 million guest arrivals in the past 12 months. “Hospitality is a large, growing market and we strongly believe that helping more people to travel is good news for everyone,” he said.

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

MasterCard Reveals Japan’s Fastest Growing Tourist City

Japan Real Estate

Japan Investment Properties

27 Sept, 2017 –

On Tuesday, MasterCard revealed the results of its annual Destination Cities Index. The survey not only provides insight into the spending of international travelers but also predicts where they’ll visit next year. According to MasterCard, Osaka is the fastest-growing destination in the world — and has been since 2009. Over the past seven years, overnight stays from international visitors have grown 24 percent.

MasterCard interprets that Osaka’s rapid tourism growth is indicative of the growing importance of Asia and the Middle East. The index’s fastest growing cities for tourism include Chengdu, Colombo, Abu Dhabi, Jakarta, Tokyo, Hanoi, Riyadh, Lima and Taipei. Overall, Asia dominated the list of where people are traveling. Of the top 10 destinations for overnight international visitors, seven were in Asia (including Istanbul). The only exceptions were London, Paris and New York City. Of the world’s largest cities, Bangkok had the most international visitors stay overnight last year, but MasterCard predicts that Tokyo will see the most growth this year.

“Cities that apply technology to simplify services and connect people with their passion points can become true destination cities and realize the benefits of increased visitors and greater spending,” Carlos Menendez, MasterCard’s president of enterprise partnerships, said in a statement.

Japan’s rapid rise through the tourism ranks is likely due, in no small part, to the country’s preparations for the 2020 Olympic Games. In addition to improving mass transit options throughout the country, Japan is also making its famously-complicated toilets easier for tourists to understand. Tokyo is also reportedly developing a manmade meteor shower for the occasion, too.

(Source – “Travel+Leisure“, Pic – Osaka / “Pedro Szekely“)

You Asked Us – “Does Age Really Matter?”

Japan Real Estate

Japan Investment Property

26 Sept, 2017 –

Location, location, location is what we hear about most when it comes to real estate. But what about age?

A major change to Japan’s Building Standards Act for earthquake resistant construction methods occurred in 1981. While 1981 may be the pivotal point for some real estate investors when purchasing an apartment unit in a co-owned building, it may surprise you to know that what is more important than the building’s age is actually the building’s management.

Management ensures that the building maintains sufficient funds for repairs, renovations and refurbishments to the exterior and roof, boiler, water pipes, light fixtures, elevators, electrical breakers, etc. When purchasing a unit, be sure to conduct due diligence to ensure that the accumulated funds collected from unit owners are sufficient to cover repairs and ongoing maintenance. If funds are depleted, then the renovations history should reflect the expenditure.

As an example, you might find a unit in a property built in 1979, prior to changes to the Buildings Standards Act, recently renovated, with a stable tenant. And, you might find another unit in a building built in 1985, after the changes to the Act, with no renovations and insufficient funds for maintenance and repairs. Because of the maintenance, the 1979 building would likely have a higher occupancy rate posing less of a risk to your cash flow investment. A far more attractive purchase, regardless of its age. Sometimes the year of build matters less than the renovation history.

And, back to location, if this same older building is under 10 minutes walking distance to the nearest train or bus station and centrally located, it would most definitely be worth considering. But, don’t take too long, attractive units like this don’t last more than a few weeks, sometimes days in the Japanese property market.

The 1981 Building Standards Act doesn’t apply to all structures. It is more significant for reinforced concrete blocks, which are most large apartment buildings in Japan.  Age is less relevant when purchasing an entire building with land independently owned. In this case, the focus would be on renovations to raise value rather than year of build.

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

Q & A – Japan’s Negative Interest Rates and their Effect on RE Property Investment

Japan Real Estate News

Bank of Japan, Tokyo

15 Sept, 2017 –

This Week in his Q&A column on “Asian Property Review” magazine, NTI’s Asia-Pacific Executive Manager, Mr. Ziv Nakajima-Magen explains the impact of negative property rates on the property market and financing.

Q : I read that Japan now has negative bank interest rates. How would this affect my property loan denominated in yen? And how would this impact the Japanese property market overall?

ZNM: This move by the Bank of Japan (BOJ) is the latest in a series of attempts to re-ignite healthy inflation in the world’s third largest economy – and mainly because the previous attempts have been met with only limited success. BOJ governor Kuroda, who was appointed by and works closely with Prime Minister Shinzo Abe since 2012, is hoping that by taxing financial institutions’ funds kept in the country’s central bank, he would be able to force these institutions to invest in a more diverse, global and constructive manner – rather than “sit” on their deposits as they have been doing historically.

The reason for this lack of diversity, aside from the infamous Japanese mentality of avoiding risks at all costs, is mainly due to the fact that any interest, even a very modest one, becomes far more positive in a deflationary environment, where costs of domestic goods and services keep dropping – as do nominal wages. By taxing these deposits, Kuroda hopes to force these institutions to withdraw and invest their (and their clients’) capital, thereby turning a deflationary cycle into one of growth.

Regardless of the results of this exercise, one should not assume that banks will now start paying borrowers to borrow, or even reduce interest fees accordingly – in fact, some even speculate that they may increase rates, to cover their own increased borrowing costs. The reasons for this are various (aside from the obvious greed factor) – firstly, banks are not obliged to pass any such rate hikes or reductions on to their clients, and often quote a myriad of reasons stating why they cannot, or will not, do so. Secondly, the effects of this maneuver on the value of the Yen is yet to be determined – if the very mild effects this announcement has had on the stock market is anything to go by, it may be very lukewarm indeed – and a yen-denominated loan taken in another country, with associated international fees and interim middle-men and institutions, may be affected even less. Lastly, and perhaps most importantly, a drastic reduction in official bank interest rates, which would have to also be applied to client savings, may kick off a withdrawal frenzy, which the banks and government will want to avoid at all costs.

As for effects of this particular move on the property market – again, if its effect on the stock market is anything to go by, I wouldn’t keep my fingers crossed – it will take far more than a single headline grab and policy aspect implementation to move things one way or another. The property market is closely tied to the economy as a whole in a “chicken and egg” type of symbiotic relationship – and deep and meaningful structural, social and economic reforms will still be required for the market to respond positively in any meaningful, long term way.

If viewed on its own, this particular strategy may do nothing – but if joined with other policies designed to tackle Japan’s big issues, such as the declining birth rate, gross national debt and outdated approach to globalization – it may just be a big step in the right direction.

(Source – “First Published in ‘Asian Property Review,” Pic – Sapporo at Night / “OiMax“)

You Asked Us – “What Does Insurance Cover?”

Japan Investment Properties

Japan Real Estate

08 Aug, 2017 –

Earthquakes and natural disasters are known to occur in Japan. Therefore, a popular question asked by investors is, “What exactly does insurance cover?” It’s surprising just how much standard insurance covers and how affordable it is.

Coverage for individual apartment unit owners varies based on type of damage, location and age of the building. Standard insurance protects from damages due to natural disasters such as an earthquake, tsunami, volcano, as well as fire and flood damages. It is surprisingly inexpensive, only 100 to 300 JPY a month/unit, approximately USD $1 to $3 per month with the cheapest rate paid five years in advance.

While coverage is extensive, it only covers 25% to 50% of the cost of damages to buildings with the upper range more for total loss. The rest of the cost of damages would be covered by the building’s accumulated funds pool (also known as a sinking fund) collected from unit owners. Combine the two sources, assuming the building’s funds are well managed, and the total costs for damage would be covered. With this in mind, before purchasing a unit, be sure to ask about the status of the building’s accumulated funds pool as part of your due diligence as well as the repairs and maintenance history. As a guideline, the accumulated funds pool should be healthy enough to cover at least 33% of the body corporation fees (accumulated funds and management fees) assuming there have been no recent renovations. Because investors set aside monthly funds for the building’s funds pool, many prefer to keep insurance to a minimum.

It’s important to also note that coverage only extends to damages to the building, not the units themselves. Internal damages are the owner’s responsibility (other than balconies, exterior walls, etc). But, this would be the least of your worries. One factor that attracts investors to Japan properties is the culture. You will hardly ever encounter damages from tenants other than normal wear and tear, or any serious tenant payment issues, evictions, etc.

(Source – Priti Donnelly, Nippon Tradings International”, Pic – Osaka Skyline Panorama / “inefekt69“)

Experts Urge Americans to Invest in Europe and Asia

Japan Properties

Japan Real Estate Investing

1 Aug, 2017 –

A major Wall Street firm is urging investors to take money out of the U.S. stock market and move it abroad. Stephen Wood, the chief market strategist at Russell Investments, believes the bull run is on borrowed time. He says investors should pull some house chips off the table.

“Valuations are being decreasingly supported by the fundamentals in the U.S. market,” said Wood on Monday’s “Trading Nation.” “We would say after eight-plus years of a strong rally, trim some of those profits and rebalance.” Wood has a 2,300 rolling 12-month target on the S&P 500 — a 7-percent drop from current levels. If he’s right, the impact could be more dramatic than you think. “Home-country bias, for example, is a problem I’ve seen in just about every portfolio,” said Wood, who is advocating a more global, multi-asset approach to investing.

His firm has a significant footprint in the markets, managing $266 billion in assets worldwide. “It’s really an all-hands-on-deck multi-asset strategy that we’re advising,” he said. “I think that the non-U.S. is the strongest call.” Wood is recommending investors to seriously consider investing in Europe, emerging markets and Asia. Those places, he says, aren’t facing the same valuation problems as the U.S.

“The European Central Bank will be accommodative as opposed to the U.S. Federal Reserve, which is looking at how and when to take away accommodation,” added Wood. “From the economic cycle perspective, we think Europe is stronger right now than the U.S. and the valuations are relatively attractive.”

Besides the “rich” valuations in the U.S., he also believes there is a more specific catalyst looming that could spark the end of the bull market: The Fed’s plan to unwind its $4.5 trillion balance sheet in the coming months. “That is going to take a little while for the market to digest,” Wood cautioned.

(Source – “CNBC“, Pic – American Money / “frankieleon“)

You Asked Us – What is the Difference Between “Net pre-tax Yield” and “Gross Yield”?

Japan Real Estate

Japan Properties

20 July, 2017 –

Yield is a key factor in real estate investing, expressing rental revenue as a proportion of a property’s purchase price. As prices rise, yield falls. But depending on the types of costs included in the calculation, yield can vary. Here are some differences to watch for:

Yield, Net Pre-Tax

For an accurate picture of the return you can expect on your investment, our preference is yield as net pre-tax, which includes all known costs and calculated before taxes. This is what we show on our deal analyzer spreadsheets which breaks down the numbers in terms of price, costs, return, etc. so that you can see how the property’s monthly cash flow is obtained. Net pre-tax yield includes all known purchase and running costs such as the realtor fee, proxy fees, property management, purchase tax, insurance, and monthly building fees. We cannot provide numbers we don’t have, of course. Therefore, we exclude annual taxes (property tax and income/corporate tax) and unknowns such as vacancies, maintenance/repairs or capital appreciation/depreciation. But, we do give you an indication of what you can expect.

Gross Yield / Coupon Yield

On some realtor listings you will find gross or coupon yield. Keep in mind that while the higher yield sounds attractive, you may want to ask about purchase costs and management fees not included in the yield. These fees can surprise you with 15% to 20% on top of the purchase price.

Fukuoka’s Lower Yields

As I mentioned, as prices rise, yield falls. Such is the case for the growing city of Fukuoka, located on the northern shore of the Japanese island of Kyushu. In Japan, property prices increased ever since the March 2011 earthquake and tsunami disaster off the Pacific coast of Tohoku and the subsequent nuclear spill at Fukushima. As a result of the disasters, families and businesses sought to distance themselves from Tokyo and moved to Japan’s western coast in Fukuoka.

Because of its location, Fukuoka is also considered the gateway to South East Asia, particularly for visitors from South Korea and China, being closer to Korea, Shanghai and Taiwan that it is to Tokyo.

This tier one location is a preferred choice for investors for its minimal cash flow risk, since properties are easily tenanted. Here you can find rental yield between 6% to 8% net pre-tax.

Sapporo’s Higher Yields

Sapporo is the largest city on the northern Japanese island of Hokkaido. Mainly a white-collar community with academic facilities being its main economy driver, aside from tourism. After the 3-11 disaster, property prices took a serious hit in the city after a decline in tourism for most of 2011-2013. Even though tourists returned and real estate has since picked up, property prices remain depressed, while rental rates, which are affected more by long term residents, stayed the same. As a result, stable rent plus declining property prices continue to generate higher yield.

Hokkaido is one of the world’s most renowned winter sports resort locations attracting millions of Japanese and international tourists every year. Due to its slopes and winter snow festivities tourism is not likely to taper down. We are seeing approximately 7% to 10% on average, net pre-tax.

(Source – Priti Donnelly, Nippon Tradings International”, Pic – Fukuoka Tower / “Warren Antiola)”

Condos Rebound in the Tokyo Area after Four Years

Investment Properties Japan

Real Estate Investment Japan

25 July, 2017 –

The number of new condominiums put up for sale in the greater Tokyo area in the January-June period grew 1.9 percent from the previous year to 14,730 units, marking the first rise in four years, a private think tank said Tuesday. The condominium market in the area, which covers the capital and the three neighboring prefectures of Kanagawa, Saitama and Chiba, may have hit bottom following a slump stemming from high prices, industry sources said.

In recent years, sales of condominiums have been sluggish in the area as a result of rising prices on higher labor costs, which in turn reflect a labor shortage. Developers have responded by reducing supply. In the first half of 2017, the average unit price rose 3.5 percent to ¥58.84 million, up for the fifth consecutive year, according to the Real Estate Economic Institute. The average price was the third-highest on record, led by high prices in Tokyo’s 23 wards.

But the average price turned lower in Kanagawa and Chiba as the rise in labor costs came to a pause. An official at the institute said sales are expected to pick up in the July-December period, with highly popular large-scale condominium complexes set to go on sale in July and August.

New condominium supply in the Kansai region, which covers Osaka, Kyoto, Hyogo, Nara, Shiga and Wakayama prefectures, fell 1.4 percent in the January-June period to 8,815 units, the institute said. The average unit price was down 2.7 percent at ¥37.09 million.

(Source – “The Japan Times“, Pic – Blue Hour Over Tokyo / “Balint Foeldesi“)

Video – Japan Gift/Inheritance Tax Basics

20 Jul, 2017 –

The following video from our partner, Mr Sadaysu Ito of “Sadywell Accounting” in Tokyo, clearly explains the basics of inheritance taxation for property investors, drilling down into the important differences between those residing in Japan, residing overseas, as well as the residence of the bequeathing ancestors.

For part 2 of this video, as well as for other video related to Japanese tax matters, feel free to visit Sadywell’s YouTube channel

For a brief explanation of general taxation matters related to Japan real estate property investments, see our taxation information page

Housing Demand and Tourism Boost Land Prices in Japan

Japan Real Estate

Japan Properties

05 July, 2017 –

Land prices in Japan rose 0.4 percent on average as of Jan. 1 from a year earlier, marking the second consecutive year of gain, the National Tax Agency said in its annual report released Monday. The highest land price in the country was ¥40.32 million per sq. meter for land in front of the famous Kyukyodo stationery store in Tokyo’s Ginza shopping district, up 26.0 percent from last year. The spot remains the most expensive in Japan for the 32nd consecutive year. The price established a new high water mark, topping the ¥36.5 million recorded at the same location in 1992, soon after the burst of Japan’s asset-inflated bubble economy. The price plunged in the following years, falling to as low as ¥11.36 million in 1997.

Tourism boom and the expectation of improved business conditions ahead of the opening in April of the Ginza Six mega-shopping complex nearby helped inflate the price in the upscale area. The survey showed the continuing trend of a widening gap in land prices between major cities and rural areas, with land values rising in 13 prefectures, mainly those hosting metropolitan cities, while prices fell in 32 prefectures and remained flat in two others.

Analysts say higher land prices in major cities are partly attributable to solid housing demand and tourism-related factors while areas that saw lower land prices are often rural and with a falling population, exacerbated by diminishing birthrate and a growing proportion of elderly people. The survey, which compared year-on-year price changes at 325,000 points across the country and is used for inheritance tax calculations, also showed there was no prefecture that posted positive growth in land values this year after posting a fall in the previous 12 months.

By prefecture, the rate of increase was the highest, at 3.7 percent, in the area hit hard by the March 2011 earthquake and tsunami in Miyagi Prefecture, as the opening of a new subway line in Sendai drove real estate development in areas near the new service. Miyagi was followed by Tokyo and Okinawa, which both saw 3.2 percent gains. By contrast, land prices fell by the largest degree — 2.7 percent — in Akita. In Kumamoto, hit by large earthquakes in April 2016, a 0.5 percent fall was registered following a 0.1 percent gain the previous year.

Takeshi Ide, chief analyst at real estate research company Tokyo Kantei Co., said higher land prices in major cities are often linked to an increasing number of foreign tourists, a trend that encourages construction of hotels and development of traffic networks, and that the trend is likely to continue for some time. “For regional areas that have few resources that attract tourists, it is necessary to set up an attraction to draw in people in and also to enhance the locale’s ability to promote its region,” he said.

The survey also listed the sharpest price rise of 77.1 percent in Niseko Kogen Hirafusen Street, in Kutchan, a ski resort area popular with overseas tourists in Hokkaido. The area saw the steepest price gain for the third consecutive year.

(Source – “The Japan Times“, Pic – Ginza / “Antonio Fucito“)

You Asked Us…I’m new to Japan’s property market. Where is the best place to invest?

22 Jun, 2017 –

Japan Investment Properties

Japan Real Estate

Across Japan, other than in Tokyo, foreign investors have been turning to investments in high yield, cash flowing apartments that are surprisingly affordable. A property market of high supply and equally high demand. From USD$25,000 to $60,000 you can easily find properties with rental yield of 6% to 12% on average net pre-tax, depending on the location. “Net pre-tax” is important because it factors in all known costs. It doesn’t include taxes and unknown costs.With yield this high, it’s not surprising that offers are made on attractive, high-yielding properties almost as soon as they hit the market from local investors. Based in Fukuoka, our Japanese and English speaking team help foreign investors also get their foot in the door.

Since you are new to the market, unless you are looking for properties synonymous with Australia, UK and even New York focused on appreciation, I would avoid the Tokyo market. In this speculative arena, you would be paying a mighty high price for very low yield. Instead, a safer alternative would be small apartment investments in tier one and tier two locations as you would find in Fukuoka and Nagoya with rental yield of 6% to 8% net pre-tax.

Comparison of the Numbers in the Three Tiers

In the first tier, based on appreciation potential and population are Fukuoka, Osaka and Tokyo. In Fukuoka, both population and prices have increased in the last three years, and occupancy rates are higher, making this city a safer investment for monthly rental income. For a 1 bedroom apartment priced at USD$32,000 at 7.4% yield net pre-tax, you could earn approximately $200/month in rental income.

In the second tier are cities such as Nagoya, Yokohama, Kawasaki and Sapporo. Sapporo is Japan’s 4th largest city where you will still find a steady long-term tenant base, however population growth is lower than that of the first tier and prices haven’t increased significantly, resulting in slightly higher yield. In this tier rental yield would be closer to 9% to 10% net pre-tax. For a 1 bedroom apartment priced at $28,000 at 9% yield, net pre-tax you could earn approximately $218/month.

Finally, as you grow your portfolio, you could dabble in more adventurous, smaller but stable satellite cities or attractive industrial towns such as Kobe, Kumamoto and Kitakyushu where you can find yield upwards of 10% net pre-tax. In this example, a two bedroom unit in Yokohama, priced at approximately $80,000 at 10% yield would generate approximately $650/month.

Cash Flow and Appreciation

As unusual as it sounds, in Japan, properties depreciate while land value appreciates. With this in mind, the best scenario would be to benefit from cash flow and appreciation. For as little as $300,000 you could own a small apartment building in a growing area which would give you both appreciation on the land portion of the building as well as rental income from each unit. As an example, in Fukuoka city, on a $300,000 building, with rental yield of 7% net pre-tax, you could generate $1,900/month in Fukuoka city.

These are just a few examples of what you can expect in the Japanese property market. Ask me about properties to suit your criteria with the highest yield.

(Source – Priti Donnelly, Nippon Tradings International”, Pic – Sapporo at Night / “Alpha 2008)”

Japan’s Economy on a Warm Streak

Japan Investment Property

Consumer Spending

15 Jun, 2017 –

TOKYO — Japan’s economic engine may not exactly be roaring, but there is a definite hum in the air. The economy grew for a fifth consecutive quarter at the start of 2017, the longest stretch of growth in more than a decade. The government of Prime Minister Shinzo Abe has been trying for four and a half years to coax the economy into a higher gear. Although Japan’s output is still the world’s third-largest, after the United States and China, consistent growth has been elusive — the result of headwinds like a declining population and deflation.

What Happened?

Japanese gross domestic product increased by 2.2 percent in annualized terms in the three months through March, the government’s Cabinet Office said in a preliminary estimate on Thursday. The economy has now been expanding for a longer period than at any time since 2005-6, when it grew for six quarters in a row.

The pace of expansion also accelerated from the previous quarter, and was stronger than economists had expected. Analysts surveyed by news agencies had forecast a growth rate of 1.7 percent, on average.

What Is Driving Growth?

Exports have been lifting output since the start of the expansion, and they did so again last quarter. A broadly recovering global economy is helping, as is a weaker yen, which makes Japanese cars, electronic components and other goods more affordable abroad. (Japan’s trade surplus irritates the Trump administration, which has criticized some of the country’s practices.)

The domestic side of the economy has been shakier, with spending by consumers and businesses mostly weak and inconsistent. But in the latest quarter, consumption and business investment both rose.

Is the Economy on a Hot Streak?

A warm one, certainly. Output grew 1 percent in all of 2016 — not exactly China-fast, but about twice what economists estimate Japan should be able to achieve given its shrinking pool of workers and consumers. For the first few years after Mr. Abe came to office, in 2012, on a promise to kick-start growth, the economy lurched between expansion and contraction. Now it appears to have found a more stable groove.

Is ‘Abenomics’ Succeeding?

The government and the central bank have been pouring money into the economy, and there’s little doubt that those moves have helped lift growth. But a crucial ingredient is missing: inflation.

The big idea behind “Abenomics,” as Mr. Abe’s strategy is known, was to engineer a rise in consumer prices, which would in turn lift corporate profits and workers’ pay. That, the government said, would make the economy grow not only faster but also more consistently. Prices have barely budged, however, leaving many economists speculating that the current streak, though welcome, will fade.

(Source – “The New York Times“, Pic – Shopping in Japan / “Ivan Walsh“)

Japan’s Shared Houses a Trendy Lifestyle Choice for Social Singles

Japan Properties

22 May, 2017 –

Fully furnished rooms with shared kitchens, chandeliers, soundproof music rooms and parties galore. Plus, the chance of finding the love of your life. Shared houses in Tokyo as well as in major cities such as Kyoto offer these and more as an upmarket and a trendy lifestyle choice for singles who like the convenience and sense of community.

While the concept is not new – the first shared houses in Japan emerged about 20 years ago – it is gaining popularity as the number of singles grows. One in five men and one in 10 women had never been married by the age of 50, according to the latest government data published in 2010. The figures are expected to rise to one in three men and one in five women over the next 20 years. Ms Ai Hasegawa, a media art designer in her 30s, is one happy camper after moving into a luxurious 41-room shared house in suburban Tokyo called Ryozan Park.

“As an artist, there are days when I don’t leave the house at all, working on my projects. When I was living in London, I went into a kind of depression because of that lifestyle,” Ms Hasegawa, who worked as an art and design researcher at the Massachusetts Institute of Technology, told The Straits Times. “So when I moved back to Japan, I wanted to avoid that,” she added. Living at Ryozan Park, she said, means almost every night is party time, with spontaneous drinking sessions in the kitchen or lounge for anyone in the mood for it. Ms Hasegawa added: “I get to meet interesting people from all walks of life here, and the size of the community is not too big to be overwhelming. The gym is also very convenient.”

The number of shared housing properties in Japan has tripled to nearly 3,000 over the past three years, offering a total of some 40,000 rooms, according to the Japan Shared Housing Organisation. Hituji Incubation Square, which runs an online portal listing available shared housing in Japan, said the number of properties on its site has increased by 20 times since the website was started nearly 10 years ago.

In the past three years, the number of inquiries for shared housing has doubled to about 200,000 a year, the company said, mainly from women in their 20s to 30s looking to widen their social circle. Shared housing used to be seen as less than ideal as residents had to share the kitchen, bathrooms and toilets, which were likely to be furnished very simply. But, in the past five years, they have been transformed into a coveted mode of living by operators hoping to tap the growing pool of singles.

Rooms in shared houses mostly cost between 50,000 yen (S$620) and about 150,000 yen a month, including the cost of utilities, Wi-Fi and maintenance. Cleaning services for common areas are also included. It is not cheaper but more expensive than renting a private home. Residents, however, are happy to exchange privacy for a larger living space. They see it as an affordable way to live in a chic environment with facilities that look like they are from an interior design magazine.

Ryozan Park, for example, has chandeliers in the kitchen and leather sofas in the lounge and reading room. It also has a gym, soundproof music room and sun terrace. Mr Noritaka Takezawa, who owns and runs the facility, positions the property as “modern village living”. His family, which is in the real estate business, has lived in the area for the past three generations. “It’s about building a community and forming deep social bonds,” he said, adding that he screens potential tenants to make sure they fit in the community, which has about 40 residents.

Another selling point of shared houses is that tenants generally do not need to pay a deposit of up to five months’ rent, which is required when renting a private apartment in Japan, or provide a guarantor. Operators also offer more flexibility in the form of shorter leases that start from one month, compared with the usual two years for conventional apartments.

Ms Nanako Otake, a Hituji spokesman, said the market was also boosted by the increasing number of foreigners living in Japan. She added that “Japanese who return from overseas or those who are hoping to interact with foreigners” also increased demand. In general, Japanese tenants stay an average of two years, while foreigners stay six months, according to Global Agents, which operates the Social Apartment brand of shared housing, with more than 1,200 rooms across Japan.

Mr Nobuki Arai, a professional gambler in his 40s, lives in a large shared apartment in Tokyo with more than 100 residents run by property management company Oakhouse, which has 20 years of experience in the industry. He had travelled around the world for 15 years and, upon returning to Japan, found shared housing convenient. He had tried shared housing overseas as a student. “It has turned out to be more enjoyable than I expected. The large shared common spaces and public bath are plus points, and I get to meet foreigners to practise my English with,” said Mr Arai. Global Agents spokesman Zacharie Coskun said: “Tokyo can be intimidating, even for Japanese who have moved in from another part of the country. ”

A majority of people choose to live in our apartments as a means of meeting people and nurturing relationships.” A survey of 500 residents by Global Agents showed “having people around just in case something happens or when I need help” was the top draw of communal living. Expanding their social circle was another main reason cited. That, after all, is the spark for romance. Ryozan Park, for one, has had 24 residents couple up and marry since it opened nearly five years ago. “The shared house environment allows people to interact and get to know one another on an intimate level,” said Mr Takezawa. “If couples at the shared house have a tiff, they are able to get advice and confide in their housemates.”

Four of those couples have chosen to move out to apartments within a five-minute walk to stay close to the rest of the “village”. The families also keep in contact by having regular outings during which the husbands look after the children and the wives enjoy the day off. One of the couples, Mr Hideharu Miyakawa, 32, and Madam Yuki Usami, 37, met at Ryozan Park in September 2012 and decided to tie the knot after dating for about 11 months. Mr Miyakawa said: “We got to know each other’s living habits before moving in together officially, and it was great being able to go home together after our dates.” At Oakhouse, Mr Arai said he knows more than 10 couples who have hit it off. At his former shared house, which was larger, with more than 260 residents, 11 couples got married during the three years he lived there. “Of course, there were other couples besides those who got married,” he added.

But, for some, the convivial atmosphere of shared houses can get too much. Ms Keiko Tamura, a customer service executive in her late 20s, left a shared house after six months as she was overwhelmed by the “pressure to socialise”. “If you don’t take part in the events, you may be seen as rude or unfriendly. In Japanese society, one is expected to ‘show face’ at these events, and it took a toll,” she said. “I also found myself spending more money on buying drinks or food for parties.”

(Source – “The Straits Times“, Pic – Restaurant, Japan / “John Blower”“)