Buyer Beware! – Page 3 – JAPAN PROPERTY CENTRAL K.K.

80% of sellers/buyers not choosing home inspections

According to a survey carried out by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) in the first half of 2018, only 18% of transactions involved home inspections.

Between April and September 2018, a total of 5,932 home inspections were carried out across Japan. A total of 12,904 inspections were forecast for the year, almost double the number seen in 2017. Still, this amounts to less than 8% of the 169,000 existing home sales on an annual basis.

by Zoe Ward

Liquefaction in Sapporo caused by poor soil conditions

The September 2018 Hokkaido Iburi Earthquake resulted in severe liquefaction in part of Sapporo’s Kiyota Ward, leaving roads caved in and homes leaning at dangerous angles. As of October 3, as many as 1,452 homes had suffered damage in Kiyota Ward. This wasn’t the first instance for the neighborhood with liquefaction observed during the 2003 Hokkaido Earthquake which had an epicenter 300 kilometers away. The liquefaction hazard map issued by the city had previously designated this area as being of high risk for liquefaction damage.

by Zoe Ward

Behind the real estate investment scams that have Japan’s regional banks concerned

The following is a summary of the recent information that has come out since the share house and whole-building investment scam scandal has been exposed in Japan.

Inflated rental projections

Guaranteed or estimated market rents were set much higher than actual market rents in order to inflate yields and sale prices. Share houses were perfect for this since it can be difficult to gauge appropriate market rent, making it easy to inflate figures. Share houses operated by one defunct operator were running at occupancy ratios of just 20%.Read more

by Zoe Ward

Whole building investment scam widens

The scandal surrounding dubious lending practices and falsified loan documents on investment properties widened last week with the Asahi Shimbun newspaper obtaining over 1,000 records of correspondence that allegedly implicates real estate agents and several Suruga Bank employees. The correspondence, which took place via email and LINE messages, is alleged to show the bank staff receiving numerous falsified documents including faked rent rolls for investment buildings.Read more

by Zoe Ward

Second share house company files for bankruptcy

In the wake of a widening investment loan fraud scandal, a second share house company in Tokyo has filed for bankruptcy.

The company operated by developing and selling share houses to individual investors and then managing the properties on behalf of the buyers, offering high yields and guaranteed rents. However, as was the case with the other defunct share house operator that filed for bankruptcy last month, the vacancy rates of the share houses was higher than forecast and the company was not able to make the guaranteed rent payments to investors.Read more

by Zoe Ward

Falsified documents submitted to 11 Bank Branches

A report by the Asahi Shimbun newspaper on May 5, has alleged that that mortgage fraud scandal now extends to 11 Suruga Bank branches across Japan. The newspaper alleges that five companies are involved in obtaining loans from various Suruga branches that were based on falsified income statements, resulting in over-loans to borrowers. The Suruga branches that have discovered faked documents include Tokyo, Shibuya, Shinjuku, Midtown, Futako-Tamagawa, Kawasaki, Omiya, Tama Plaza, Sendai and Kyoto.

On May 7 the newspaper dropped another bombshell, reporting that the lawyers representing a group of investors had received an audio recording of a phone call that took place in April 2016 between a real estate agent and an alleged bank employee. In the recording, which was released to the public, the broker asked the bank staffer for advice on what to do if a sales agency was unable to tamper with the loan application documents. The bank staffer mentioned a company that takes on a lot of those requests. The broker then called the company in question and they confirmed that they could falsify documents. Suruga's share price briefly dropped by as much as 11% the following morning before recovering.

by Zoe Ward

Share house investment scam sees bank share price dive 20% in one day

The scandal surrounding a failed share house developer continues to grow this month as more information about dodgy spruiking tactics and falsified documents comes to light. As many as 700 investors from a single share house developer are facing potential bankruptcy, but the number of victims could easily rise as other investment-spruiking companies are put under the spotlight.

A lawyer representing a class action by investors against the Tokyo-based share house company alleges that the inflated price of the share houses sold to investors was determined by the maximum amount that the bank was willing to lend a buyer, rather than the true market price. A gross return was 8 ~ 9% was then applied to the sale price, even if it was higher than the market rent. The buyer would buy under the assumption that they could rely on stable, guaranteed rents that would provide them with a cash surplus each month. The high yield was only possible because the share house operator was providing a rental guarantee that far exceeded the rent they were receiving - causing the operator to lose money each month.Read more

by Zoe Ward