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2017-11-06

Five reasons to invest in Japan Real Estate/Property

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Five reasons to invest in Japan Real Estate/PropertyJapan’s economy is gaining momentum and back on the track after two decades lost. Consequently, Japan is in third place with an economy of $4.4 trillion, which represents almost 6% of the world economy. When the economy is going up, and people are confident about the future, they are more incline investing in the Real Estate (i.e., buy houses, upgrade their current homes or buy larger houses). The Japanese government is playing the excellent role in attracting foreign companies and foreign investors, aiming to open the Japanese Real Estate Market and further business expansion. As a result, Japanese Real Estate Investment is emanating new appeal and the perfect time to invest in it. Japan is different from the rest of world regarding Investment purpose in Real Estate Investment because of the following reasons:

  1. Japan is the World’s Third largest economy 
  2. Relatively lower property prices compared to Overseas Real Estate Markets
  3. The increase in the Property/Real Estate Investment Value
  4. High rental income generated by Japan Real Estate Investment
  5. 2020 Tokyo Olympic Games

1. Japan World’s third largest economy

In Japan Real Estate Investment is considered secure because its economy currently ranks third regarding nominal GDP and fourth regarding Purchasing Power Parity. According to the World Bank Report (2017) after facing the hard times since 2008, economic growth is once again positive to approximately 1.7% in 2017, which is an important indicator of the economic strength of a country. Real GDP is adjusted for price change. Therefore, it is regarded as a key indicator of economic growth. The all determinant positively makes the Japan Real Estate Investment more reliable to those who want to increase personal wealth due to the cost of property and housing consistently increased over time.

2. Relatively low property prices compared to overseas markets.

According to OECD report, the Japanese government is doing an extraordinary job to improve quality of life of a local citizen in the Better Life Index. Therefore, Japan is ranked at the top in personal security. It has a high average in income and wealth, education and skills, jobs and earnings, personal security, and social connections compared to OECD standards. According to the Global peace survey, Japan is ranked the 5th most peaceful country, following after Iceland, Denmark, Norway and New Zealand. Japanese are law-abiding people, and there are no racism issues exist there. The earlier mentioned reasons attract the foreigner to invest in the Japan real estate and forced them to compare the real estate prices in the other developed regions of the world. The local authority researched shown in Figure 2, Tokyo real estate investment prices in comparison with major cities of the world is less.

3. Increase in the Property/Real Estate investment Value:

Japan Real Estate Investment prices remain high, regardless of dawdling economic growth within the last decade. According to Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) Japan’s overall Real Estate Investment have risen by 4.7% in January 2017. MLIT has launched the tourism strategy Japan doubles overseas tourist target for 2020. As a result, Japan Real Estate prices abruptly increase because tourism boom directly positively linked with business activities and economic growth.Tokyo is the capital of Japan and attracts foreign tourists all around the world because of its unique installation of the vending machine, shopping, and law-abiding behavior of local citizen. TOKYO – real estate prices are rising prices have increased for four consecutive years in the residential, commercial, and industrial areas. The commercial areas real estate prices in Japan prefectures like Tokyo real estate has risen 4.7%, Osaka (5%) The following are the key reasons to raise the real estate prices in Tokyo:

  • Increasing demand for lavish condominiums in Tokyo by the foreign investor and rich People
  • Better economic predictions about the Japan’s economic growth.
  • The number of existing condominiums sold has risen 3.7% to (3,735 units) in March 2017.
  • Tourism boom and expected to increase in coming year*
  • Government initiated large-scale development projects in the central Tokyo

4. High rental income generated by Japan Real Estate Investment

According to the Japan Real Estate Institute (JREI), rental market for a new luxury condominium in Tokyo will continue at a steady rate. But the rental yields are always high in Tokyo comparing compared to other cities like (London, France, Sydney, Shanghai, etc.,) in developed countries. Japan’s residential mobility rate is lower (21%) than western countries like USA (50%) and Canada (41%). Therefore, a large population of renters, combined with generous rental yields, makes Japan- especially Tokyo—an eye-catching place for a property owner. According to Global Property Guide Research, gross rental yields earned on the purchase property in Tokyo, before taxation, vacancy costs, and other costs - range from 3.4% to 5.4%. Another research from JREI shows that rental income for new apartments will continue to see steady growth in rent levels, with average rents increasing roughly 1.4% this year, and maintaining 0.5% growth in 2018 and 2019, before slowing a little to a 0.4% rent increase in 2020.The luxurious apartments have high rentals income than smaller apartments in the central districts of Tokyo than northern districts. In the northern districts, rental yield (5.4%) on the smallest apartments is reasonable but maybe building maintenance and repair cost can take a big bite out of your income. The higher rental income generated from investing in smaller older apartments rather than involves the high maintenance cost. People are doing real estate investment in the north of Tokyo with the intention of rent it. The purpose of Investing in these high yield apartments can be worthwhile for the average investor range (20 to 40 Million Yen).

5. 2020 Tokyo Olympic Games

Since, Tokyo, Japan has been selected as the host of Olympics 2020 Games in the international Olympics committee. It has affected the whole country economy positively, but the especially real estate investment of Tokyo observed significant boom. Such an abruptly raise interest from the local and foreign investor due to mainly two following reason:

  • The rate of foreign tourists rate has increased
  • An Increase in the mass development infrastructure

Real Estate Economics Institute and observed that condominium prices in 23 wards (five metropolitan districts) of Tokyo increased by 13.7 percent in January from a year earlier. A Star Report Global (STR) is expected that Tokyo’s hotel pipeline is increased by approximately 8 % or additional construction of room over the several years. As the number of foreign visitors is growing, some hotels have also announced the expansion of the hotel proximity. This is because Olympic Games indirectly related construction investment such as the construction and refurbishment of private hotels, urban redevelopment, the construction of commercial facilities, and the enhancement of transportation infrastructure.Reference:

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