THE JAPANESE WAY OF LIFE
How does positive cashflow and competitively priced property sound to you? Unbelievable? The good news is, it exists. In the far eastern reaches of the world, this very attractive combination can be found in Japan’s real estate. On top of the positive cashflow, it is supported against a reputation and tradition of honesty and honour. There is no stronger safeguard for hard earned money.
Confucianism and Buddhist doctrines are deeply ingrained into Japanese history. These beliefs have been integrated into their way of life and business practices. Mutual respect, one’s repute and integrity are some of the hallmarks of Japanese culture. The chivalry you find in the martial arts stories of old, is very much alive in Japan.
REAL ESTATE INDUSTRY IN JAPAN
In the real estate industry of Japan, there is an unspoken code of honour. The moment an offer has been accepted by a seller, no further offers will be presented to the seller amongst the realtors marketing the property. Irregardless of whether an offer has been made officially, in contract or a deposit, all other offers are declined whether they are equal, lower or higher offers. Even if the next offer doubles meaning that a realtor’s commission is therefore doubled, nobody is tempted and the seller will never know about it.
After an offer has been accepted, the property is simply closed and filed away immediately. That agreement is set in stone. That deal is deeply respected. No counter competition permitted, no other exceptions permitted.
So, there’s an established integrity principle in the business place. This modus operandi is very common and what you would expect from a “monoculture”, as explained by my Japanese friend. There is no tolerance for divergence from their norms. Everyone is expected to follow the same code of behaviour. Deviating from the usual is disapproved and it likely leads to ostracisation. The deviant person will be avoided and shunned from the general herd.
Generally, most Japanese, be they cashiers at the supermarkets, or small retail owners and staff, will give you an honest and polite service. Still, however uniformly the Japanese tend to behave, there will be bad hats lurking around of course. But then, no place is perfect.
Next, let’s jump in to learn a little about the Japanese properties. Just three simple facts you need to know. T
- No capital gain for a Japanese property. You can check the stats if you can’t get your head around this, especially if you belong to the speculating herd.
- Japanese population is declining and it is ageing faster than any other country. This is why there won’t be a capital gain as far as property is concerned. Property price trend is heading downwards.
- There is a steady depopulation from outlying suburban areas towards the metro areas of Japan.
It has now inched down to bargain price levels in comparison to international property pricing standards. It looks like a lot of negatives. So, what’s attractive about all this?
Well, it’s all about the cashflow. There are very few other countries that quite matches Japan’s cashflow rate, not to forget it is available at very, very low level of business risk.
However, the Japanese are highly ethnocentric and sometimes averse to foreigners. What this means is that the foreign inflow remains low, and this keeps the competition down. This situation also translates into many opportunities out there. Pre-tax returns of between 10-15% can be found here. Although there are nice returns, the risks are still present especially if you haven’t been doing your homework. Of late, there’s the hype being built around some of the outlying “hotspots” such as Fukuoka where prices have been rising since last quarter of 2012. That’s more than two years worth of increase yet, property brokers for the condominiums there are touting it as lucrative or decent purchases. For the unwary, there is statistical evidence of overheating, or overpricing in that region.
NTI, a buyer’s agency based in Fukuoka reported that throughout 2013, they observed a continual rise in prices, and that prices for “high-yielding condominium apartments” have increased by 30%. These “high-yielding condominium apartments” refers to those built between 1973 to 1992. Furthermore, they declared that yields in the central districts have dropped from a maximum of 14% to 11%. However, they claim that the percentage yield is still attractive, although a “far cry” from the buyer’s market of old during 2012.
THE JAPANESE TENANT
Although the laws in Japan, are more tenant oriented, your average Japanese tenant would be your perfect tenant. They would not miss paying the rent unless something catastrophic happened. This makes Japan a landlord’s paradise. If you were renting out to the local Japanese, there’s nothing much t worry about as they pay rent punctually, totally abide by the rules and they’re not prone to hooligan behaviour.
However, the rental yield would be a lot lower than if you were letting it for short-term stays. Of course, the short-term stay crowd is a much more varied mix than your predictable Japanese tenant.
Your thoughts? You’re welcome to have your say below.