Nippon Tradings International
Japan’s akiya problem has evolved into an unexpected opportunity. The country’s aging and diminishing population have led to a surge in abandoned houses, enticing foreign buyers drawn to Japanese culture and unable to afford similar properties in their home countries due to soaring prices and inflation.
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Robust demand for lodging by visitors and rising prices create an ideal scenario for investment. In fact, foreign investors have spent US$2 billion on hotel deals in Japan so far in 2023, the most compared with any other sector in Asian commercial property, according to MSCI Real Assets.
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Japan’s housing sector has been flat for years. But if dwellings are plentiful and attainable, why should that be a bad thing? These days, when Japan’s property market makes the headlines at all, it’s usually for the wrong reasons: The millions of homes sitting empty across the country, perhaps, or the notoriously poor investment that buying a house can prove. But look at it from the perspective of housing as a roof over people’s heads rather than a store of a value, and Japan starts to look like a success. Even in these post-Covid times, the country faces no affordability crisis. Rents are stable - one key reason that inflation is so comparatively low - and housing can be found for almost any budget.
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With corporations becoming increasingly cost-conscious, vacancies in some of the existing buildings, which offer better value for money with respect to location or grade, are being taken up faster than those in newer properties. All-Grade rents slid by 0.4% from the previous quarter, with rents continuing to be lowered in larger properties which are set to face stiff competition from the significant new supply slated for 2023.
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Some concern that we often hear surrounds the confusion that there is no credit check system in Japan… “How is it possible to check out a potential tenant for my downtown Tokyo apartment or any other place?” “Are there credit guarantee companies and, if so, how reliable are they?” What kind of securities are available and which are the best for investors to use?
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A question that arises as often as the sun is… “Can I get a loan for real estate investment in Japan?” Many first-time hopeful investors become very frustrated due to the severe lack of financing options for foreigners without residency. For cash buyers wishing to invest in a low-stress, fully secured and reliable deal, there may yet be hope! We propose a solution to this dreaded obstacle for wishful lenders and seasoned cash buyers to make the best of it!
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With Tokyo & Osaka approaching their pre-1990’s property bubble peak, and yields in other investment hot-spots such as Fukuoka, Kyoto and Nagoya also gaining in price and becoming more compressed, opportunity-seeking investors are on the lookout for smaller cities that may still provide higher, yet stable and reliable rental returns. However, in a country as insular as Japan, where cities other than those already frequented by international visitors remain veiled in language and cultural isolation, the quest for attractive investment destinations can be difficult.
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Hongkongers are returning to the Japanese property market after a two-year absence, taking advantage of a weakening yen, which is at a 20-year low against the US dollar. “Inquiries for Japanese homes from Hongkongers have surged by up to 40 per cent this month,” said Anvy Cheung, chief executive of Sakura Global, which specialises in Japanese property. “In the past two years, most of them just stayed on the sidelines, adopting a wait-and-see approach [due to the pandemic].”
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A resurgence in demand last year among Asia-based investors for commercial real estate in markets such as the US, Australia, mainland China, the UK and Japan, led to activity that surpassed 2019’s pre-pandemic volume. New data from CBRE shows that after a muted 2020, Asian outbound investment in the asset class rose 69% year-on-year in 2021, to $54.6bn.
View articleCondo units, which come with a smaller land footprint (the building’s entire land footprint is distributed between the owners, proportionate to their units’ floorplan sizes), are usually the cheapest way to enter the market, and provide immediate turnkey profitability potential. The only cheaper asset type out there is rural land, with or without old, mostly abandoned houses built on it – but these types of properties rarely turn any profit upon purchase, and would require significant renovation and/or marketing work before they can be tenanted and start generating income – if at all.
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The midcareer job market in Japan is changing fast, with an increasing number of workers trading secure jobs at large companies for new opportunities at startups. The trend is particularly strong among workers aged 40 and older - the loyal backbone of corporate Japan - and could serve as a catalyst for Japan’s economic revival, said one expert.
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As the Bank of Japan asserts its standing as a lone dove among its peers, the yen is reclaiming its status as the world’s most popular funding currency. The trade comes with risks though, given the yen could revert to being a safe haven if tensions over Ukraine heighten or if an aggressive Federal Reserve triggers a markets selloff.
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