Cheap Japan property an option for Hong Kong investors
As property prices spiral in many Asian countries, the Japanese market has curiously lagged behind. Perhaps investors never got over the shock of the Tokyo real estate bust of the late 1980s.
As property prices spiral in many Asian countries, the Japanese market has curiously lagged behind. Perhaps investors never got over the shock of the Tokyo real estate bust of the late 1980s. But, for most of the past two decades, Tokyo has seen no capital gain, says Christopher Dillon, author of Landed, the Guide to Buying Property in Japan.
The steep devaluation of the yen has made Tokyo property cheaper and yields healthier for foreigners looking for an investment property. Moreover, Japan's population is shrinking, which means it is ageing. This means there are fewer people living in each household. Paradoxically this has translated into more demand for property.
The Tokyo market has its quirks. For example, Dillon urges investors to consider tiny Tokyo flats - typically about 140 sq ft - that are popular with office workers. This is space for one room plus a tiny moulded bathroom and a kitchenette. This works in central Tokyo where harried salarymen prefer to live close to work and see their flat as a place to crash after a long day at the office.
"Little places are where the action is, no one wants to live in larger homes," says Dillon. Recreation properties in areas such as Hokkaido are also popular with foreigners, but watch out for areas elsewhere in skiing areas that were over-built and abandoned. A US$10,000 ski chalet can look attractive but hides a huge deferred maintenance cost, warns Dillon.
Everyone in Japan is moving to cities, be they young and talented or retirees, leaving the rural areas increasingly deserted. "The countryside is becoming like Detroit almost, with petrol stations and hospitals closing," cautions Dillon. "You can buy very cheaply in rural areas, but who is going to want to go there? Everyone is moving to Tokyo."