The percentage of land under Japanese and US military bases in Okinawa is increasingly being held by investors from outside the prefecture. As of 2018, 9% of the 44,523 landlords were located outside of Okinawa, a 3 point increase (or around 1.4 times the number of landlords) from 2012.
Some of the out-of-state landowners may have inherited the land from family members, but there is an increasing trend of these land parcels being sold off by elderly owners and being circulated in the property market.
The land was forcibly confiscated by the US forces during the post-war occupation. When Okinawa was reverted back to Japanese rule in 1972, the Japanese government began paying rent to the landowners under military bases. In 2020, the government has allocated 102.1 billion Yen (approx. US$915 million) to pay this rent, a 1% increase from 2019’s budget. Rent has been gradually increasing over the years, despite the size of US bases shrinking.
The Ministry of Defense adjusts the land rent each year to correspond with any changes in land values. However, to keep the peace and avoid angering landowners, the rent has essentially either remained stable or increased, even when the property market has gone through a downturn. Unlike investing in rental housing, there is little risk of vacancies or price volatility. These factors have made this an appealing proposition for investors seeking stable and secure yields in a low-yield environment.
US bases outside of Okinawa were generally established on former Japanese military-owned sites, with only 13% of the land owned privately or by cities and towns. In Okinawa, around 75% of the land under military bases is owned by private individuals.
The price of Military land is often advertised as a multiple of its annual rent. Land that is likely to remain under military control for the long-term tends to have a higher multiple and a lower yield. Lots under the US-controlled Kadena Airbase have multiples of over 60. A 100 sqm lot under the runway of this airbase comes with an annual land rent of 167,000 Yen and an asking price of 11,220,000 Yen, providing a gross yield of 1.49%.
Source: The Nikkei Shimbun, February 21, 2020.
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