Buying in Japan: Seminar Feedback

[always_learning]

Last Thursday I attended a seminar on purchasing property in Japan. It was held in the Canadian embassy, co-hosted by the ANZ, Canadian, German and American Chambers of Commerce in Japan.

The title was “Thinking of Buying In Japan” a 2 hour seminar.

Here is some quick feedback to you all

The Market

• Price declines are stabilizing in many areas.
• Prime areas such as Chiyoda (central), Shibuya, Minato and Meguro “wards” (=suburbs) are showing early signs of growth (0-3%) last year.
• Tokyo in particular had a huge boom in the late 80’s early 90’s, but if we look back 20-30 years the prime suburbs have performed around 5-10% compound. Of course if you purchase at the peak you would be sitting on a 75% decline.
• Summary, declines have stopped early signs of growth in prime suburbs.

What to Buy

• Used apartments (condos) larger than 90m2 with parking show firming prices recently.
• Apartments on the 2nd floor or higher, close to raillinks, south facing, less than 8 years old show strongest resale value.
• Luxury (150m2) sized apartments have some bargains at present. And can represent good buying.
• Houses on land also good but lower returns and more limited market (most people “like” apartments)

Finance and Tax

• Acquisition costs around 6% of value. 3% if purchase at court house sale (as you don’t have to pay the REA buyers fee of 3%)
• Finance: Most Tokyo banks will lend to foreigners with permanent residency (Mizho), some banks such as the bank of Tokyo-Mitsubishi lend to work visa holders (who say they intend to reside permanently). No discussion about finance for non-resident foreigners (sorry).
• If you want a loan, best way is to get a loan the REA (who knows the details) to push it thru, REA also are part mortgage broker in Japan. They want to sell and really will push hard to get finance for you. (any non-resident want to try?)
• 20 year fix loans at 3.75%
• 1 year fixed at 1.75%
• 100% LVA for newly built homes/apartments, 80% for “used”.
• 33% income serviceability.
• Can reduce income tax (rebate) of 1% of outstanding loan balance each year for 10years (ie for the first 10 years of a 30 year loan pay 3.75-1.00%=2.75%).
• Generally limit is 100Million/yen (about AUD$1.3M) and floor space no larger than 275m2
• Buildings (houses/apartments) over 15years old are normally determined by a bank to have zero value hence LVA is 80% on land content only…if you have extra cash then 15year old homes are good buying as many still have 15 years usability.
• Japanese just don’t like older homes, renovation is not really a part of landscape here. Tax system/deductions set up to favor bulldozer/rebuilding over renovation.
• Country banks will turn you down because you are a foreigner.
• Mortgagee sale/court-house auction system cheap, but need 100% cash, actually you only need a 20% deposit but you must be certain you can get finance in3 months or you will forfeit the deposit. Good places for 7Million yen (AUD$100K) available with Auction system.

Basically there has never been a better time to buy in Japan (well I guess before the bubble, and then sell at the peak would have been very very nice).

 

[Patosan]

Fantastic AL,

I have been going to PM you about the seminar and to pick your brains about buying here, in Japan.
I'm increasingly seeing it as the next step for us, due to the Oz market having such poor yields, and the exchange rate going the wrong way.

I do still have some questions, perhaps you can help.

Can we buy here with via an Oz Trust ?

Do you have a great accountant and solicitor here ?
This point to me seems critical since it is hard to find "good" ones in any language.

Are the small mezzonette 2 storey apartment blocks popular in Tokyo ?

What are the starting prices for the luxury apartments you mentioned ?

Are you thinking of buying foir the LONG haul or just 5 to 10 years ?

Would you consider buying in Osaka ?

How do we find the mortgagee auction system ?

I guess that's enough for now.

 

[twodogs]

Beautiful country is Japan, with lovely people. That's why I am marrying one

What yield can be expected for units/houses ? Japan does not have much of a social security fallback, so I guess people must work to be able to rent, but I believe there is a lot of government housing, really huge high rise estates. However, young people tend to not stay at home with the parents (the leaving home at 25 with mum doing the washing stuff) so small cheap accoumadation may have the best market.

Ja matta ne

 

[Aceyducey]

However, young people tend to not stay at home with the parents (the leaving home at 25 with mum doing the washing stuff) so small cheap accoumadation may have the best market.

Maniyak,

From reports I've seen kids staying at home with mum was a big problem in Japan....potentially cuts into the cheap accomodation market.

Cheers,

Aceyducey

 

[always_learning]

I have been going to PM you about the seminar and to pick your brains about buying here, in Japan.
Sure no problem

I'm increasingly seeing it as the next step for us, due to the Oz market having such poor yields, and the exchange rate going the wrong way.
I too believe that in general OZ growth for the near future will be limited, AUD$ is high making deposits easier to cough up..ie. my AUD$ LOC. In good residential areas of Japan property market is scraping along the bottom, nowhere to go but up, the only question is when (this year, next year, in 10 years?"

I do still have some questions, perhaps you can help.
Can we buy here with via an Oz Trust ?

When I purchased in OZ, my trust just registered the purchase with a memo. The legal title is held in the trustee's personal name, only the trust's documentation registers it as owned by the trust. I assume (DaleGG is on holidays) that I would just do the same for my OZ trust.
In Japan trusts structures also can be created called "shintaku", but use of this structure seems to be confined to major developments. My developer friend said it "only" costs them $40K to set up a trust/shintaku.

Do you have a great accountant and solicitor here ?
In Japan no, dont need one (yet), if you find one let me know

This point to me seems critical since it is hard to find "good" ones in any language.
You bet.

Are the small mezzonette 2 storey apartment blocks popular in Tokyo ?
Yes, in fact my target IP purchase would be a small block of 4,6 or 8 1room apartments (1DK) purchased in the auction system, I would then tidy them up and lease them to short term English teachers ie foriengers on limited income. Lower entry cost ( no key money, 2 weeks deposit) but weekly charges above local market

What are the starting prices for the luxury apartments you mentioned ?
I guess around ichioku (100,000,000 ) ie just above the limit for normal finance.

Are you thinking of buying foir the LONG haul or just 5 to 10 years ?
I take the never sell approach! My wife takes the "never buy" and "sell it all" approach to investing.

Would you consider buying in Osaka ?
I would in good areas. But since I live in Tokyo areas around Tokyo is my target.

How do we find the mortgagee auction system ?
If your browser supports Japanese try this link to the court auction system
For machine translation try babelfish

I guess that's enough for now.

 

[always_learning]

Beautiful country is Japan, with lovely people. That's why I am marrying one
Marrying a Japanese woman...hmmm are you sure you know what is underneath, its a big trick? ...beware you are most likely marrying a female of our species. So dont come back and complain to me that she has "changed", all Japanese men I meet say there wife didnt change after marriage, all foreign men say their wife "changed".

What yield can be expected for units/houses ? Japan does not have much of a social security fallback, so I guess people must work to be able to rent, but I believe there is a lot of government housing, really huge high rise estates.
Yep "Work" ="Food". But it's not like 3rd world asian countries. No much of a pension system and it's totally bankrupt anyway (like all 1st world pension systems). Government housing, high rise and ugly.

However, young people tend to not stay at home with the parents (the leaving home at 25 with mum doing the washing stuff) so small cheap accoumadation may have the best market.
Like most 1st world countries younger people are staying home longer into there mid twenties. The general idea is you stay home until marriage. At the time of marriage you purchase one appartment and pay it off over 35years and spend the rest on cars and consumer goods

Ja matta ne

On a gross level Japan has problem's, but it is a huge market, people say Brisbane property markets is in fact number of sub markets to me from a Tokyo perspective Brisbane is a "country town". Tokyo has 20Million people in and around it. Huge market, even the "English teacher" market is enough for you to make a IP investment. So dont look at a gross level just look at a more limited market.

 

[Bi1lmurray]

Don't Do It

As an Aussie whos been working in Tokyo 4 years now buying investement
property in JP is High Risk. some reasons, qualitiy of buildings, fittings is poor hence high maitnenance, no earthquake insurance, always lots of new mansions going up, old propertis are less desirable and even devalue.
How do you manage it from Oz ? as a Shyujin (landlord ) you'll need an agent who can help lease, and the ones I deal with don't speak English you need reasonable command of japanese. They also don't do a lot, so maitnenace will be expensive. All contacts are in Japanese, no such thing as English and translations are expensive and not always acurate. Don't forget the Xrates if you have to payout in $AU can be very expensive, even with a strong $AU. As noted foreigners can't get loans from JP finacial insitiutions.

Generally not for your average Aussie plonker..

However yeild is quite high you have a one off key money as a present to the landlord, for average mansion(apartment) about $4000, also bond, and rents monthly can be low end AUD$1500 to AUD$10,000+ but most likely no capital growth. But how do you manage the expenses and comunnication & for a loan a JP national spouse is essential.

( NB: The nipponese have some how managed to misapply the term mansion to an appartment block )

As a sibebar, If your a Forgien living in JP no japanese land lord will rent you an apartment with out the contract being held by your Company,i.e. can be
very difficult to find accomodation. Quite often Gaijin / foreigners are rejected by landlords because quite simply they are not japanese...such lovely people, indeed.

Do note that CBA NAT etc have branches in Tokyo and they offer yen loans exclusivly for property in AU. So the plan is, and your being paid in Yen ofcourse, is get your investment loans brought over to JPY you can service the loan either locally in yen or AUD$ from the rent, so it can be anatural
hedge against Xrates AUD/JPY. The yen loan is less than 2% think of all that principal you'll knock on the head in no time. So don't forget to ask your boss
you want a 5 year stint in Tokyo.

Disclaimer: The only reaon why I'm in JP is for the money and sayonara to ATO.

 

[always_learning]

As an Aussie whos been working in Tokyo 4 years now buying investement
property in JP is High Risk. some reasons, qualitiy of buildings, fittings is poor hence high maitnenance, no earthquake insurance, always lots of new mansions going up, old propertis are less desirable and even devalue.

Clear trends now that in many of the "better" suburbs prices have stablized. Earthquake insurance is available ($$). As for prices declines/earthquakes... my plan is simple, buy at land value or less!

How do you manage it from Oz ? as a Shyujin (landlord ) you'll need an agent who can help lease, and the ones I deal with don't speak English you need reasonable command of japanese. They also don't do a lot, so maitnenace will be expensive.

Japanese speaking friend would be usefull, or a English speaking agent, otherwise I agree it is tough!

All contacts are in Japanese, no such thing as English and translations are expensive and not always acurate. Don't forget the Xrates if you have to payout in $AU can be very expensive, even with a strong $AU. As noted foreigners can't get loans from JP finacial insitiutions.

Generally not for your average Aussie plonker..

Dare I say "Dont be average"!

However yeild is quite high you have a one off key money as a present to the landlord, for average mansion(apartment) about $4000, also bond, and rents monthly can be low end AUD$1500 to AUD$10,000+ but most likely no capital growth. But how do you manage the expenses and comunnication & for a loan a JP national spouse is essential.

Not essential, there are foriengers using Japanese bank finanance (but all as far as I know living in Japan with either PR or work visas).

( NB: The nipponese have some how managed to misapply the term mansion to an appartment block )

As a sibebar, If your a Forgien living in JP no japanese land lord will rent you an apartment with out the contract being held by your Company,i.e. can be
very difficult to find accomodation. Quite often Gaijin / foreigners are rejected by landlords because quite simply they are not japanese...such lovely people, indeed.

This is not true, yes many landlords wont rent to you, but not all. Anyway where you see pain...then; Sounds like a business op to me. Actually there are foriegners with appartment blocks renting to "Nova" (english) teachers...and doing very well I understand. Know your target market.

Do note that CBA NAT etc have branches in Tokyo and they offer yen loans exclusivly for property in AU. So the plan is, and your being paid in Yen ofcourse, is get your investment loans brought over to JPY you can service the loan either locally in yen or AUD$ from the rent, so it can be anatural
hedge against Xrates AUD/JPY. The yen loan is less than 2% think of all that principal you'll knock on the head in no time. So don't forget to ask your boss
you want a 5 year stint in Tokyo.

After 7 years ...I worry I can ever get back

Disclaimer: The only reaon why I'm in JP is for the money and sayonara to ATO.

.... no comment => more to Japan than money!

 

[bear]

caveat emptor

(Ja matta ne).....

Two things come to mind from my property experience in Japan,

1) Onerous Tenant rights (if you are a landlord). Rent reviews not nec. tied to market for sitting tenants, virtually impossible to extinguish lease if landlord.

2) Punishing CGT and taxes on repatriation of funds.

However, might work as a l-o-n-g term asset play - equity to fund investments elsewhere. Famously demonstated when the 'value' of Tokyo real estate exceeded the value of all real estate in USA back in late '80s.

Oh, those were the days!

 

[Patosan]

I agree with Bi1lMurray that IP in Japan is best for those here not in Oz.
.... the xrates are just too unpredictable with our volatile AUD.

Though as far as contracts and buying is concerned I feel finding some good team members is the answer, i.e. acountant and solicitor.
My wife is Japanese but I doubt she would ant to get involved in that side of things ... she'd stress out.

I'm willing to try to move from the little pond we call Oz market to the ominous ocean of the Japanese ... oh I hope I don't regret starting down this road.

 

[Tibor]

As an alternative what about puting together as sydnicate? Risk reduced, smaller capital is required, allows access to larger fund, etc.

If the market is gonna turn, very good returns can be gained.

Just a thought.

 

[PS2]

This is very interesting. I love Japan having been there a number of times, but never for work (an opportunity I would dearly like to take, but somewhat difficult with family in tow). The Japanese mentatlity of new is better would make investment in the mansions somewhat risky I would think.

Don't think I would be willing to invest in Japan without a more thorough understanding of the way the market works over there.

P

 

[pennyk]

Any info on investing commercial/outside of Tokyo

Our business is planning on importing into Japan - already started setting up distribution, and as a family we are also thinking of living there for a while to set things up. But we wouldn't live in Tokyo. We love Kyushu, having been there 6 or so times. So, we are thinking of setting something up in Fukuoka, which is also closer to Korea, which is our other big market and China. We love Fukuoka and Kumamoto, so they would be there areas we would be looking at.

I know Fukuoka prefectural govt offers subsidies etc for setting up business there, and there is an austrade office there. So, if we did that, we would be thinking about purchasing in Fukuoka, probably - both commercial and residential.

Is it possible to purchase IP's in Japan if you aren't a resident? I was reading something somewhere and it seemed to imply you had to at least be a resident.

Pen

 

[astroboy]

Last Thursday I attended a seminar on purchasing property in Japan. It was held in the Canadian embassy, co-hosted by the ANZ, Canadian, German and American Chambers of Commerce in Japan.

The title was “Thinking of Buying In Japan” a 2 hour seminar.

Here is some quick feedback to you all

Thanks AL very thorough, however if we (Australians living in Aust) can't invest what is the point ? You know this is an Oz based forum, we know the Japan model doesnt apply here so where does that leave us ?
ab

 

[pennyk]

reply to astroboy

I found the post really helpful astroboy. Who knows whether there are other aussies on the board like me who have been looking at investing in Japan, moving to Japan etc. I think it's valid to look outside of Australia at property investing on the board. And from the number of responses there are a reasonable number of people on the board interested in property in Japan, or living there for whom it is an area of interest.

Penny

 

[always_learning]

Thanks AL very thorough, however if we (Australians living in Aust) can't invest what is the point ? You know this is an Oz based forum, we know the Japan model doesnt apply here so where does that leave us ?
ab

Who says you cannot invest? Anyone can buy land in Japan, they dont have the restrictions like Australia!

Here's a tip, anyone can get on a air-o-plane, come to Tokyo, buy something...anyone can do it ! All you need is cash (ouch)!

Here is another tip....some things are as cheap as chips! Can you believe I saw a 1000m2 block of land including a small house in Tokyo state in the court auction system for AUD$4,900.

Why did I see it and you didn't? Because your not looking and I am!

 

[Aceyducey]

Who says you cannot invest? Anyone can buy land in Japan, they dont have the restrictions like Australia!

Here is another tip....some things are as cheap as chips! Can you believe I saw a 1000m2 block of land including a small house in Tokyo state in the court auction system for AUD$4,900.

Yeah only a few countries have the sorts of restrictions Australia has on foreign ownership...and it was set up specifically to stop Asians (particularly Japanese) buying up the country in the 1980s...no-one was worried about the Brits buying it in the 1960s and 70s

I find it very amusing how times have changed & that aussies are now looking to buy cheap property in Japan....

So Always_Learning - did you buy it? And if not, why not!

Cheers,

Aceyducey

 

[astroboy]

Ohhhh My misundersatnding AL. Thankyou for the redirection.
Hmmmm so I *can* buy but I cant borrow ,,, correct ?
astroboy

 

[Patosan]

I'm not sure it's impossible to borrow for non-residents. Though from the majors here it would seem to be. There are specialty lenders set up for lorrowing against USA, Oz, British and other IP from here, so there very well could be someone who would loan to a non-resident. The key point is the exchange rate RISK for the repayments.

 

[Patosan]

Thanks AL very thorough, however if we (Australians living in Aust) can't invest what is the point ? You know this is an Oz based forum, we know the Japan model doesnt apply here so where does that leave us ?
ab

Astroboy,
I think you raised an interesting point here; about the forum being Oz based. It's probably fair to say that the majority of forumites have no intention of buying IP OS, also that the majority of visitors to our forum are Oz resident. The key word in both cases being "majority" not all.

Some may be open to considering spreading their portfolio outside of Oz or NZ which gets many posts, now or at some time in the future. It's not unthinkable that some Aussies already own some IP in Japan ... but how can we access and archive their knowledge ? A post now and then may produce a wealth of useful info and inspire some to go it international.

Though I am based in Japan I for one didn't realise the weight of numbers in favour of investing here til AL brought them to light, initially as a response to someone else's thread. While I have a lot of homework to do yet, it does seem an attractive and viable option for my family. I can't tell you how pleased I was when I saw that AL had started this particular thread.

AL and those interested could communicate by PM or email only but I feel that the forum may be a richer place for having non Oz location info as well. Of course I'm biased on this point.

PS
If Aussies are considering moving some capital to Japan the current exchange rate is very favourable "at the moment".