Should you Invest?
Japan's changing fortunes may well make it worth considering for
the long-term or buy-to-let investor; however there are issues to
consider. Despite large price drops over the past 15 years,
property in the major employment hubs isn't cheap by the standards
of many other countries and prices are not growing as fast either,
with any rises likely to be slow for the foreseeable future. Japan
has also felt the effect of the financial crises in the US and the
Japanese property market has slowed as a result, one of the hardest
hit by the crunch outside of the US and Europe. This does introduce
the serious risk of real estate companies (mainly the smaller ones)
potentially going bankrupt, and investors should bear this serious
concern in mind.
- That being said, the market is open to overseas investors as
there are no restrictions on ownership
- The law favours landlords with tax breaks and rent
negotiation.
- There is an increasing demand for rental property and prices
are currently low enough to offer respectable yields.
- There are reasonable low transaction costs when purchasing a
property.
- There is low rental income tax for landlords and owners.
- The Global Property Guide index shows landlords can expect to
achieve yields of between 4.7 and 7.2% in Tokyo, depending on
location and style of property
Rental Yields
Rental yields for apartments in Tokyo currently range between
4.6% and 7.1%; this works out at 6.2% for Tokyo's city centre.
Rental yields like these are really good for investors as interest
rates at the moment are extremely low. There are more people moving
from rural areas into the major cities which increases the rental
potential. House prices are presently falling faster than rents
which mean higher rental yields.
Price History
The real estate market in Japan has seen out a long, hard
recession over the past 15 years, which saw real estate prices
dropping by around 50% in some areas. The country's recovery looks
as though it is well on the way now, however, with prices up by 4%
in 2006 and further increases of 7.75% in the first part of
2007.
On average, apartments outside central Tokyo currently cost from
around 32m yen and from around 120m yen up to around 500m yen in or
around the most sought-after central districts of Chiyoda, Minato,
Chuo, Shibuya and Shinjuku, with houses in the outer suburbs
costing from 80m yen.
Other cities have pretty much shared Tokyo's fate with stalling
prices that start at around 30m yen for a small apartment. In rural
locations prices have declined markedly due to the recession and
migration of the workforce and such homes are unlikely to offer
good investment returns. Ski property is one area that is seeing
large overseas investment and appreciation in popular resorts has
been as much as 40% in some areas, with prices currently starting
from around 25m yen.
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