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1. Losing out on the Tourism Boom

Now that you have a property in Japan, your next consideration is to rent it out.  Although, tourism is booming hot in Japan, you won’t be able to get any of the tourist dollar inflow.  You’ll just have to sit pretty whilst the hotel industry rakes in all that ready cash.  Yes, you are losing out on the tourists.  You settle for second best with the local workforce.  Your rental market audience relies on the local working Japanese and the foreign migrated employee.

 

2. Residential over supply in Japan

It is prudent to keep a watchful eye on the rising vacancy rates in Japan, now that you have a property, especially Tokyo.  The rental property supply has been growing with a renewed burst since Jan 2015, with the Inheritance Tax reduced by a huge 40%.  Many owners are either trying to rent out their apartments quickly or building rental apartments so that they can take advantage of the deductions for real estate that is currently rented to a tenant.  Future projections do not seem favourable to permanent rental income as the supply of rental properties will keep increasing, whilst demand and Japan’s population continue to decline.

As of 2013, the the Ministry of Internal Affairs and Communications’ Statistics Bureau reports that the total housing stock across Japan increased by 3,050,000 units to 60,630,000 units.  The nationwide vacancy rate increased to 13.5%.

There is certain risk of over-supply.

 

According to the latest data from the Ministry of Internal Affairs and Communications’ Statistics Bureau, the total housing stock across Japan increased by 3,050,000 units to 60,630,000 units in 2013, up 5.3% from the previous survey in 2008.

 

3. Related Commercial vacancy rates in Japan

Prices for commercial land and property have been patchy since 2014.  Japan’s commercial sector has been experiencing 23 consecutive annual declines.  As a case in point, a huge city block in central Osaka, the priciest section of Japan’s second city, remains undeveloped.

The New York Times reports that in Nagoya, which is the center of Japan’s third-biggest regional economy and also home to Toyota Motor, the local property market was enthusiastic about plans for a super-high-speed train service, although it won’t be materialising in the next 12 years.

Even though office property transactions may have jumped 8 percent in Nagoya since early 2014, and the city’s offices are filling up faster than Osaka’s, the trend looks unsustainable.  Another 3.5 million square feet of prime office space is becoming available in two years time.  This adds more than 10 percent to the current total. Nagoya brokers predict it could push Nagoya’s vacancy rate back to 17 percent.

Although some prime office buildings in Osaka, Nagoya and Fukuoka have started to fill up over the past year, rents have not risen.  Developers and brokers are admitting that demand is just not strong enough for a sustained recovery.

On a last note, here’s a message from Katsumi Tanimoto, general manager of business development at the Fukuoka-based property investor Genkai Capital Management.

“Investors will need greater skill and better expertise to generate good returns on properties outside Tokyo,”.

Please consider seriously about your investment options.

 

 

The Alternative Solution

Alternatively, you can consider to register for iShinChi’s management service.  We employ a different rental strategy from the usual permanent rental route, to get a higher rental yield.  Read more about our owner services here and to learn how you get your cut.  Contact us now to get the ball rolling.
Continue reading here about the renting out your properties the usual, standard way.

 

 

Sources:
Ministry of Internal Affairs and Communications’ Statistics Bureau, July 29, 2014. SankeiBiz, July 30, 2014.
Japan’s nationwide residential vacancy rate hits record high of 13.5%
The New York Times, Commercial Property Sector Struggles in Japan
Disclaimer: We do not provide hotel management services nor consultancy advice.


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