There is a lot of incorrect and misleading English information floating around about the Japanese real estate market. I chose this recent PR-type article from PropGoLuxury.com as a typical example of the type of misinformation.

“Japan real estate remains one of the priciest in the world. Tokyo came fourth in the Global Property Guide’s 2009 survey of the world’s most expensive markets, behind Monaco, London and Moscow. The average price for an apartment in Tokyo city centre is a staggering US$17,998 per sqm”

FALSE

economist-house-indicators

The Global Property Guide 2009 list with the above $/sqm price is here, and states the average price in Tokyo as USD$17,998/sqm (1,500,000 JPY/sqm). Average prices are closer to half this amount. In Minato-ku, the most expensive and desirable location in Tokyo, the average price for a 120sqm apartment of any age is 760,000 JPY/sqm (Homes December 2010 data).

For apartments built in the last 10 years, the average price is 930,200 JPY/sqm. Using the price-to-rent ratios, the Economist house-price indicators show Japan to be 34% undervalued (the most undervalued out of all the countries surveyed). Perhaps this disclosure on the Global Property Guide says it all: “We draw our figures from our own, in-house analysis”.

“A recent study by The Economist Group reports that on average Japanese houses last for only 30 years.”

TRUE(-ish)

Wooden houses are usually replaced after 30 years. However, proper maintenance and repairs can make a house last much longer, but with low construction costs many homeowners or buyers find it easier to rebuild. Concrete construction may last 50-60 years, and there are now 100-year concrete products available.

“Buildings have little value – the land does” Davis says, “which means there is basically no market for second-hand residences.”

TRUE AND FALSE

“Buildings have little value – the land does”– TRUE. Land in central Tokyo is expensive and makes up a higher proportion of the total price (approximately 70% for a newer property, and 80-90% for an older property). In the rural areas where land is much cheaper, these figures are reversed – land may make up to 30% and the construction costs may make up to 70% of the price.

“There is basically no market for second-hand residences” – FALSE. The second-hand market in Japan is very strong. There are many more opportunities in this market. According to a report conducted by REINS on real estate movements in Metropolitan Tokyo for 2009, the total number of second-hand houses sold in 2009 totalled 10,835 (average price of 30 million JPY), while only 3,472 new houses were sold (average price of 35 million JPY).

Source: Real Estate Information Network for East Japan

 

“Roppongi Hills and Tokyo Midtown are available only for lease – catering to a large base of expatriate as well as local families – while Mitsubishi’s upcoming project is available for sale with prices starting at US$8 million.”

  • Roppongi Hills Residence A & B (and sometimes D) units are for sale.
  • Tokyo Midtown is for rent only.
  • Azabudai Parkhouse is for sale, but it is on leasehold land. It is priced very high for a leasehold property and sales were sluggish. Prices actually started from 65 million JPY (US$776,000) and the most expensive unit was 840 million JPY (US$10 million).

“Location, in particular proximity to a subway station, is an absolute requisite for luxury residences in Tokyo”

Location is key. Convenience to subway and aboveground stations is important, but is not the sole factor in high-end central Tokyo properties where residents are less likely to rely on public transport. In Minato and Shibuya-ku you are never too far from a train station. Sometimes the best areas are not too close to noisy stations, for example Shoto/Kamiyamacho is a 10 minute walk from Shibuya station but is much more highly valued as a residential area compared to the area directly around Shibuya Station which contains a lot of bars.

“Last March, London-based HSBC Group announced it would tie up with two Japanese real estate companies to extend mortgage loans to foreign residents so they can buy property in Japan more easily.”

MISLEADING

HSBC Premier offers mortgage products to Premier members living in Japan regardless of the real estate agency they use. The National Australia Bank also lends to foreign residents in Japan.

*Update: In 2011, HSBC Premier Japan stopped offering home loans in Japan.

Sources:

The Real Estate Transaction Modernization Center Foundation

“Froth and stagnation House prices in parts of Asia continue to soar, despite efforts to slow them”, The Economist, July 8, 2010

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