Some Notes on Real Estate in Japan

I have been in Japan for about 2 weeks now, come over for a funeral.

While I have been here I have been looking into real estate.

It seems the market here is very different to Australia.

Firstly, prices have been dropping since the ‘bubble’ burst in 1990. People are generally farily pessimistic with regards to property. They fear prices dropping further.

Prices in the Osaka area (2nd biggest city) are around $300,000 – $400,000 AUD for a house. This is about 15min to the cit centre. Sizes are generally much smaller than Australia, especially land size.

The cheapest unit I have seen was for around $80,000 AUD, in the same area of Osaka.

Unlike Australia, it seems older houses here depreciate in value very quickly. Anything over 30 years old is very cheap and people very wary of buying.

This seems to be a lot of construction ocurring. Many people are pulling down old houses and building new ones.

There are also renovation rescue type TV shows. One involved gutting a terance style house and rebuilding it. All very nice and space saving efficent design. The cost was listed as about $100,000.

It is possible to get 100% finance here for new buildings, but generally it seems finance is limited to around 70% LVR. Rates start at around 1%, but this is like a fixed intro rate for 2 years. standard variable rates are around 3-3.5%. You will generally need an income of around 4 times your repayments to qualify. it is generally hard to qualify for loans as the banks lost billions when the bubble burst.

Foreigners can get loans from Japanese Banks, but they will need to have stable employment here and to hold at least a permanent visa (which seems easier to get here than in Aust).

Yields are around 7%. Most property would therefore be postively geared on 100% borrowings. When I ask people why they don’t buy then, when it is cheaper to pay a loan then it would be to rent, they cite property taxes, decreasig values, and flexibility with renting etc.

Property taxes don’t appear to be huge. From what I found a tax like land tax may be around $700 per year for for average house. Nothing to worry about, but there may be other taxes I haven’t found yet. There is a 5% GST and death tax as well.

Building standards are differnt. Stairs here are very steep. Some are like ladders – probably around 70 dgrees -almost vertical. Many older houses do not have sewerage, having a smelly pump out system. Front doors often open up straight onto the road, and many houses completely cover the land, ie no back yard or front yard.

Car parking is a problem, especially with Big cars. Some houses have half a car space, so the car hangs out onto the road. Many have to rent car spaces elsewhere.

Property investing doesn’t seem to be a national sport like it is in Australia. At a large bookshop, there were a few books on loans and property investing, but they seemed fairly basic.

Japanese are big readers, and the books are cheap. There are many many books on the general economy, trade, investing in China etc.

renting is also different here. There seems to be many different kinds of bond money. Shikikin, Reikin Real estate agents commission and others These can all add up to many months of rent (maybe 4) and usually do not come back to you on exit. This may be one reason why people here tend not to move house much. However, not every place for rent requires all of these up front payments.

What else is there to say?

Does any one have any questions?

Terryw
Discover Home Loans
North Sydney
[email protected]