Landed Japan update

September 15, 2014 — A lot has happened since May 2010, so here’s a  Landed Japan update.

The earthquake
Topping the list is the March 2011 Great East Japan Earthquake, the subsequent tsunami, and the explosion, fire and ongoing release of radioactive material from the Fukushima Daiichi nuclear power plant.

The disaster killed more than 15,000 people and demonstrated how vulnerable Japan—and the nation’s nuclear industry—is to a major earthquake. ENEnews aggregates reports about Fukushima from government, media and academic sources.

Stabilizing, decommissioning and cleaning up the power plant will take decades. In the meantime, electricity generated from nuclear sources fell from about 30% of the total before the earthquake to 2% in 2012. The shortfall is being filled with additional imports of fossil fuels that are increasing emissions of greenhouse gases and worsening Japan’s trade deficit.

On a more positive note, property market sentiment has benefited from Abenomics, the package of economic revitalization measures introduced by Prime Minister Shinzo Abe after his reelection in December 2012. Abenomics includes three “arrows”: new fiscal stimulus, additional monetary easing and structural reforms. Two of these reforms—relaxed regulations for agricultural land and the creation of National Strategic Special Zones—could produce interesting opportunities for investors.

Improved sentiment has been accompanied by higher property prices, particularly in Tokyo. Where net rental yields of 10% were not unusual for small apartments in 2010, returns of 4%–6% are now more common. In April 2014, Japan’s consumption tax, which is payable on buildings and agent’s fees, increased from 5% to 8%. This was partially offset by a stepped reduction in the rate of stamp tax.

The demographic trends identified in Landed Japan have intensified. Japan’s birthrate is falling and the population continues to age, shrink and concentrate in major centers, particularly Tokyo and Yokohama. The number of one-person households is growing and demand for small apartments remains strong.

Market developments
Several developments have influenced Tokyo’s property market.

  • In May 2012, Tokyo Skytree opened, attracting large numbers of tourists to Sumida-ku.
  • In September 2013, the capital was awarded the 2020 games, boosting prices near the site of the proposed Olympic Village in Harumi.
  • In May 2014, the East Japan Railway Company announced that a new station, located between Tamachi and Shinagawa on the Yamanote Line, would enter service in time for the Olympics. The station is part of a redevelopment project near Haneda Airport, where a new international terminal opened in October 2010.
  • Finally, 2014 saw the completion of the Toranomon Hills complex and a ¥270 billion multilevel road linking Toranomon and Shimbashi.

Service improvements
Services for international buyers have improved since 2010. While Citibank, HSBC, National Australia Bank and Commonwealth Bank of Australia no longer offer residential mortgages in Japan, Shinsei Bank and Suruga Bank continue to serve foreign residents. These lenders have been joined by the Bank of China and the Bank of Taiwan.

Agents and developers have recruited Chinese- and English-speaking sales representatives and some judicial scriveners (shiho-shoshi) now provide information in English. New projects are sold at roadshows in Hong Kong, Singapore and elsewhere. Investors and end-users like Japan’s low prices and the fact that Japanese valuations do not correlate with those in other large Asian cities.

Higher prices and increased interest from institutional investors have resulted in additional research and media coverage, making it easier for buyers to learn about the Japanese market. The Landed series has grown to four books, including Landed Global, which features additional information about Japanese real estate.

Finally, anyone thinking of building a home in Japan should read Philip Brasor and Masako Tsubuku’s blog, Cat Foreheads & Rabbit Hutches, which documents their experience finding a site and financing and building a two-story house near Tokyo.