In recent times, Chinese property tour groups are sweeping across Japan! A real estate agency in Beijing organizes two property investment trips each month to Japan. This three-day trip of 40 people goes to cities Tokyo and Osaka. The purpose is to find a safe overseas destination for investment. The same procedure also happens in Shanghai, Guangzhou and other big cities in China.
According to Jones Lang LaSalle’s research, the percentage of Tokyo properties which were bought by foreigners was only 10% in 2012. This figure rose to 12% in 2013, 19% in 2014, and it reached 20% this year. Most buyers are Chinese from mainland China, Hong Kong, Taiwan, and Singapore. Especially for buyers from mainland China, the number of buyers is increased by 20% comparing to last year. Until October last year, most customers were from Taiwan. However, after October, the number of Chinese mainland customers exceeded that of Taiwanese.
Why Japanese properties are so attractive to Chinese investors?
1. Exchange rate
One of the reasons why many Chinese property investors are interested in Japan is that Japanese Yen has depreciated to the lowest level over the past twenty-two years. The depreciation of Chinese RMB caused the price of Japanese Yen increase by a small margin; however, it is still an advantageous time to purchase and secure Japanese property now. Two years ago, 1 RMB equaled 13 or 14 Yen. Now, 1 RMB can exchange for 18 Yen and the exchange rate of Yen has decreased by 30%.
2. Low Price with rising trend
The average price of resold houses in Tokyo is under CNY30,000/m². Compared to CNY38000/m² in Shanghai, CNY40000/m² in Beijing and CNY100000/m² in Hong Kong, Japanese property especially big cities like Tokyo have an absolute advantage over all big cities in China.
After the 2008 financial crisis, the price of property in Japan was at an all time low and beganrising 5% annually. The news that Tokyo will host the 2020 Olympic Games stimulated the price to go up, encouraging Chinese investors to look in to to Japan. This situation is similar to what happened during the 2008 Beijing Olympic Games. According to the research of JREI, the price of Japanese property has soared to a record level since 1990 due to the inflow of Chinese capital.
For Tokyo, the property price of the central six districts, which includes Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku, Shibuya-ku, and Bunkyo-ku, continues to rise more than 13.4% over last year. In addition, the supply of the property in the capital area is so limited that it is forecasted that the price of houses in Tokyo central area will keep rising this year.
3. Freehold vs. Leasehold Property Ownership
In Japan, ownership of land and ownership of property on the land can be treated as different entities. Buyers can not only own the house, but also get the ownership of the land. They can rebuild the house according to their preferences within lawful parameters. On the other hand, the properties built on leased land are not as favorable. The land is a store of value, but it is easy for houses to depreciate. The lease term of the land is usually fity years and it is difficult to sell the property built on leased land. However in China, it is not possible to get the ownership of the land. Thus people cannot reconstruct the building. Even in years to come, there is the possibility that the government may take back the land. Obviously the ownership of the land is one of the most attractive factors for Chinese investors.
4. Lower Taxes and Fees
Taxes and fees are also an important factor of why buying property in Japan is ideal. Generally, the buyer has to pay 6% of the property price in first year. For example, if you buy a property of 70m² in Tokyo with CNY￥2,400,000, you have to pay taxes like a Real Estate Acquisition Tax, Fixed Asset Tax and other fees totally up to CNY￥120,000. However, in China, the buyer has to pay transaction tax, contract tax and other fees up to 10% of the price of the house in the first year. Clearly the extra cost of properties in Japan is much lower than in China.
5. Loans from Chinese Banks
Foreigners experience a difficulty receiving a loan from Japanese banks to buy property, especially for those who do not have a permanent address or stable income in Japan. However, the good news for Chinese investors is many banks from China gradually opened branches in Japan including Bank of China and Bank of Communications from mainland as well as Chang Hwa Bank and Bank of Taiwan from Taiwan. Most of these banks can provide a loan of up to 70% of the property price. The loan conditions from Taiwanese banks are particularly attractive: borrowers can get a high credit without any visa requirements. For the Bank of China, the conditions of loans are also much more lax than that of Japanese banks. Chinese banks opened the gate for Chinese investors. With the help of bank loans, there is no doubt that more and more Chinese investors will invest in Japan making Japanese property even more popular than ever.
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