10 Reasons You Should Buy Property in Tokyo
image: Takuro Yamamoto
Investing in real estate is a decision that needs to be made with a sober mind. There are many factors to consider before pouring your hard-earned cash into an immovable asset such as real estate. Some important factors to consider include the type of property, personal income level, current credit score (if planning to take out a mortgage loan), location, and desired tenant. Location is probably the most important factor, as this will determine who your tenant pool will be and how easily the property will be to sell in the future. Tokyo has served as the capital of Japan since 1869, and is ranked as the most populous metropolitan area in Japan and the world. There are dozens of reasons that make Tokyo a great choice if you are thinking about buying a property, so let’s take a look at the top 10.
No Restriction on Foreign Buyers
Experienced investors may already feel comfortable investing in real estate in another country, but for your average buyer it can be intimidating to invest in a foreign country with unfamiliar laws and customs. Thankfully, ownership laws in Japan are fair and easy to understand. Unlike other Asian countries such as Vietnam, where foreigners are only allowed leasehold ownership of property, and Thailand, where foreigners cannot own land at all, Japan is a completely freehold market, and places absolutely no restrictions in terms of type of ownership for foreign buyers.
Japan is known for its stable economy, and significant changes to its government and economy in the future are unlikely, making it a safe country for investment. This has led to property prices that are set by the market with no interference by the government or other forces, reducing the uncertainty you may have when investing in a foreign country. In addition to that, Japan has once again been ranked as the safest city in the world, according to data compiled by the Safe Cities Index 2019, so you don’t have to worry about theft or damage to your property.
3. High Residential Occupancy Rates
The occupancy rate in Tokyo is relatively high, and is only expected to increase as more foreigners immigrate under Japan’s newly relaxed visa regulations. There are also many new developments underway, as there has been an increase in demand for housing. In addition, the opening of the 2020 Tokyo Olympics is freeing up land for massive developments, making now one of the best times to invest.
The cost of living in Tokyo is relatively cheap compared to other major cities. When currency exchange is factored in, depending on which currency you are exchanging from, you may be able to get even more bang for your buck (or pound, or euro)! Preferential exchange rates are a good deal for everybody, but especially for investors.
Growth in Tourism
Tourism is an often overlooked factor that should be considered when deciding to purchase a property. Buying an apartment in a good location, especially one with a popular tourist attraction nearby, will often give a high return on investment. This is because the apartment can potentially be rented on a short term basis for tourists. Platforms like Airbnb and VRBO have become increasingly popular choices for tourists. You can view some of the Top 5 Airbnbs in Tokyo here.
High Economic Growth Rate
When measured in terms of economic power, Tokyo is the world’s largest city. Many powerful corporations and a large percentage of Japan’s net worth are based in Tokyo, making it largely immune to the economic effects of the declining population that are being felt in some areas of Japan. The city continues to attract the best of both Japanese and foreign businesses due to the good working standards, new tax environment and strong rule of law.
Stable Political Environment
Many real estate investors have found themselves on the wrong side of the coin when it comes to buying real estate. This is particularly the case in politically unstable countries where the land on which one’s property is built may be seized by the government on a whim. This results in a huge loss for the investor, because their property may be demolished and they will likely never receive any compensation. Unlike other more politically volatile countries, Japan has a stable political environment, and drastic changes to the owner's property rights are unlikely.
Japan is often considered to be the cleanest country in the world. Buying an apartment in such a hygienic place is a good idea, because this culture of cleanliness will also be reflected by your tenants that you decide to rent to. Clean tenants make for less headache and repairs down the road.
In Japan, there is a reduced tax rate with property ownership. This has attracted many investors to the country. Nobody wants to pay high property taxes, and this is why the number of real estate investors in Tokyo is increasing daily. You can find out more about the taxes involved in Japanese real estate here.
Japan is experiencing a period when people are becoming uncertain about relying on the government pension system, as retired Japanese are living longer and longer lives. Owning an apartment in Japan means that you can generate a secondary income, without worrying if there will be enough government funds left by the time you decide to retire. Having multiple streams of income, including work income, public and personal pension, and returns on property investments is sure to set long-term residents’ minds at ease.
In summary, buying an apartment in Tokyo is ideal for those looking to diversify out of the real estate market in their own country. Tokyo real estate investors can enjoy many benefits, such as reduced tax burden, a stable economy, a peaceful political environment, increasing tourism, and a high growth rate. With the upcoming 2020 Olympics, now may be the best time to invest in Tokyo.
Sekai Property Editorial Department
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