Real Estate in Japan

Buying land as a foreigner is not that hard, especially if you're looking for a holiday home outside of the major cities. There are no residency requirements, and so long as you have cash, realtors are happy to deal with all-comers -- especially since in many rural areas the market for spare land has been in a deep funk for 18 years or more. The realtor fee is generally around 3% of the purchase price. To be sure, there is paperwork involved and taxes, utilities, and other fees to be paid, so you will need a Japanese bilingual lawyer or representative. But this is only as hard as a web search and some calls to bilingual law offices, property managers, and/or translation companies.

Terrie Lloyd reports that some interesting things going on in real estate here in Japan. Firstly the bad news. In Q2 this year, the value of real estate transactions by REITs and listed companies dropped by 51% over the same period last year. The main reason for this was that the demand for condominiums by the buying public have plunged dramatically, resulting in condo sales being off by a remarkable 84%. We are now in the midst of a severe credit crunch locally and many of the recently listed REITs are having to sell off their assets to foreign investors, who have picked their timing well. We expect more REITs to go bust, or to get bought out.

Now, much of this news involves speculation and institutions, and so is not entirely relevant for the man in the street -- other than the fact that people are putting off buying somewhere new to live. But there is an interesting new trend developing, that of foreigners (individuals, not companies) who are independently purchasing real estate here in Japan. This trend was kicked off by the availability of loans to non-permanent foreign residents by Shinsei and other banks about 4-5 years ago, then reinforced by Australian interest in the Niseko ski fields in Hokkaido, and has since started picking up steam on a broader front.Just last week a Japanese web site providing tourism information for Russian visitors, started running real estate listings also in Russian. The firm feels that as with the Australians, as Russians become familiar with Japan -- they're visiting Otaru from the oil fields of Sakhalin in droves, then they also start thinking about buying land to put holiday homes on. No reports of an actual purchases yet, but given the level of activity by Russian property purchasers in Europe, we don't think it will take long.Australia's fascination with Niseko has provided the real impetus for Japanese regional players to start realizing that temporary foreign residents are desirable as land owners and should be serviced. There are now more than 15,000 Australians traveling to Niseko every winter, to ski on the dry powder snow that it is famous for. An Australian-owned realtor, Hokkaido Tracks, whom we've been following for some years, has announced that they plan to construct 17 luxury condos at the Furano ski resort, further north, selling the 58 sq. m. -- 133 sq. m. units for prices ranging between JPY40m (US$370k) -- JPY125m (US$1.16m).Yes, these are Tokyo prices, and there is no way that anyone in that area could have imagined it would ever get this crazy. But, when you have a great concept (i.e., fantastic powder snow in a safe country just hours away), a solid consumer demand (Asians are starting to join the Australians), and an emerging internationalized infrastructure which removes foreigners from the inconveniences of Japanese language and Japanese developers, then anything is possible -- even in rural Japan.Buying land as a foreigner is not that hard, especially if you're looking for a holiday home outside of the major cities. There are no residency requirements, and so long as you have cash, realtors are happy to deal with all-comers -- especially since in many rural areas the market for spare land has been in a deep funk for 18 years or more. The realtor fee is generally around 3% of the purchase price. To be sure, there is paperwork involved and taxes, utilities, and other fees to be paid, so you will need a Japanese bilingual lawyer or representative. But this is only as hard as a web search and some calls to bilingual law offices, property managers, and/or translation companies.Once a non-resident has taken possession of the land, they can come in on a tourist visa as often as they want, with the excuse that they're here to check their investment. They would typically come in on the standard 90-day (30 days for some countries) visa. Even though they are non-resident, foreigners can open a bank account to autopay taxes and bills, by going to the local city office and asking them to validate that the fact that the person is a property-owner.There are a surprising number of homes and land plots for sale in picturesque parts of the country, making them ideal for holiday homes, and we imagine that it won't be long before Korean and Chinese buyers start to realize what the Australians have: fun, food, friends, fascination, and 'furo, all at reasonable prices. We can envisage a situation where an inflow of foreign real estate investors into rural and coastal areas will make up for the ongoing exodus of young Japanese to the cities.If you have the cash ready to go, the land is available. But what if you have to borrow some of the money? Certainly your hometown bank isn't going to have the ability nor the tie-ups necessary to value land located somewhere deep in the Japanese countryside. We know from personal experience that even Tokyo City banks are generally unable to value property outside the major populated areas.One answer is the availability of yen-based home loans to non-permanent resident foreigners living and working in Japan. As we mentioned earlier, Shinsei was an early mover in this space, and back in 2005 was offering 5-year fixed loans at just 1% interest. But while there has been no formal announcement from Shinsei to the contrary, we have heard that the bank is now less interested in foreigners and mortgages than it once was. Alternatives include Suruga Bank and some of the Japanese major city banks. However, salmost all of these loans are for owner-occupied residences.Several months back, however, the National Australia Bank (NAB) started advertising the availability of yen-based loans for Japan-based non-permanent residents. The rate is 2% over the interbank lending rate, which still means interest under 5%, and they will loan up to 80% of the property value if the loan is in yen.Perhaps the most important point is that they will lend to buyers wanting to purchase investment or holiday property.Because Japanese real estate prices outside of the cities have been falling for so long, the rest of the world has caught up and in many cases, passed right by. This means that there are some amazing deals in rural Japan. We did a little trawling on the web, through both foreign and Japanese websites, to find out what was available. How about a weekend getaway 3-4 hours from Tokyo in Kusano village, Souma-gun, Fukushima Prefecture? This quaint cottage on 105 tsubo (348 sq. m.) of land would swathed in snow during the winter and be picture postcard perfect. It is a snip at just JPY3m (US$28,000).http://tinyurl.com/5h75wvMoving up the price scale, but still very good value is a genuine antique minka with a thatched roof, located in an exclusive part of Hakone, 1-2 hours west of Tokyo. This home comes with its own natural hot springs and sits on a third of an acre of land (1,537 sq. m.). It's priced at JPY120m (US$1.1m). Drilling a new hot spring well alone can cost hundreds of thousands of dollars and take years to get permission.http://tinyurl.com/5uacljAnother popular destination for residents of Tokyo, Nagoya, and Osaka is the Hakuba ski resort in Nagano Prefecture. It only takes 4 hours by train to get there, and the snow is apparently usually very ski-able -- although perhaps not as dry nor deep as Niseko much further to the north. There are plenty of small holiday plots and residences for sale in the area, many of which were built during the land bubble of the early nineties, and which have since fallen into disrepair. Check out the listings at:http://www.hakuba-fudousan.com/Lastly, if you're looking for somewhere a bit closer to Tokyo, perhaps even somewhere you could commute from, then check out this house on a hill overlooking Zushi Bay and Mount Fuji -- fantastic views and sunsets. 2-3 bedrooms, double car garage, refurbished just this year with modern appliances and conveniences through-out, all for just JPY750,000/month (US$6,945/month).http://tinyurl.com/58qwl5Source: http://www.terrie.com