Earthquake insurance in Japan
If you own real estate in Japan, you may with to obtain optional earthquake insurance to provide some coverage against earthquake damage. Earthquake insurance payouts from the 2011 Tohoku disaster totalled 1.3 trillion Yen. Not only were homes lost or damaged from the shaking, but fires and the devastating tsunami caused significant damage.
If you are a property owner, the main type of insurance is fire insurance. However, ordinary fire insurance does not provide coverage against tsunamis or fires caused by an earthquake. For coverage against earthquakes, a property owner must obtain an additional earthquake insurance policy on top of their fire insurance.
Earthquake insurance premiums are generally the same regardless of the insurance company. Fees will vary, however, depending on the type of construction, size of the property, and where the property is located, as some areas have been assigned higher risk levels than others.Read more
How to be a successful property buyer in early 2016
February and March are the busiest months in the real estate industry in Japan. In the Tokyo metropolitan area, approximately 30 ~ 50% more sales occur in March than in April.
In April, fresh graduates will be starting at their new jobs, while schools will be starting their new year. This means many families and young workers who are moving will be keen to be settled in their new home before the end of March. If you are an investor and looking to buy a property to rent out to tenants, now is the peak moving season for tenants, so closing on a property by March is ideal.
If you are looking for a property for your own use, you may be up against more competition over the next two months, and may find that your preferred properties are snapped up.
The market for property sales in Tokyo has been heating up since early 2013, and transactions and prices have been steadily climbing. Reported sales of second-hand apartments in central Tokyo's 3 wards were up 9.7% in 2015 from the year before. It is not uncommon for a well-priced property in a prime location to sell within days or weeks of listing, and for a seller to have several offers to consider. Adding a seller’s market into the mix means that buyers are going to be up against some strong competition for the next couple of months.
For those looking to buy you will need to be prepared to act quickly in order to secure the property of your choice. Act too slow and you may miss out on your 1st, 2nd and 3rd preference.
The keys to getting the property of your choice:
1] Understand the current market
What is demand and supply like? Is is a seller’s market or a buyer’s market? How long are properties typically listed before selling?Read more
Fast moving market in central Tokyo means some buyers are missing out
As we previously wrote about in May last year the property market in central Tokyo has indeed switched to a seller’s market.
In December 2014, the supply of secondhand apartments in Chiyoda, Chuo and Minato reached a record low. Compared to 2011, there are currently less than half the number of apartments on the market. Meanwhile, sales activity has increased with the number of transactions in 2014 up 47% from 2011. Transactions in February 2015 were up 50.8% from the previous month and up 8.1% from February 2014. This was the busiest February seen in the past five years.
The supply of new apartments is also shrinking, while prices in February reached a five year high. Future supply is also looking to be limited with growing construction costs, increasing land prices and a shortage of suitable development sites causing great stress for developers.
We are noticing that even the old stock is starting to be snapped up as buyers get desperate. January, February and March are typically the busiest months in the real estate industry, as companies scramble to make last minute sales or purchases by the end of the financial year, and people get settled in their new homes before the start of the school year.
Naturally the higher demand and lower supply is pushing prices upwards. We noticed an especially steep increase in prices from July ~ August 2014 onwards, with some sellers increasing their asking price while the property was still on the market.
What does this mean for you as a buyer?
First of all, your options have already halved from a few years ago. Depending on your requirements, you may not have a lot to choose from.
Secondly, you are now competing with more buyers thanks to recent changes to the inheritance tax system which has spurred investment from wealthy Japanese, and a weaker Yen which has added to the number of foreign buyers. These kind of buyers are typically cash buyers who are prepared to move fast to secure a property.Read more
Why building repair fees are so important
Apartment buildings require maintenance and repairs to ensure a safe and comfortable environment for residents. To cover these costs, apartment owners pay a monthly fee that is saved up in the building’s repair fund. According to the Ministry of Land, Infrastructure, Transport and Tourism, the average monthly repair fee should be approximately 200 Yen per square meter (based on the interior floor area of an apartment). For a typical family sized apartment of 70 sqm, this would amount to around 14,000 Yen a month.
The amount to be collected as repair fees is decided by the building’s owners association (although they are initially decided by the developer). Ideally the fees should be set at a level that ensures enough money is accumulated for the scheduled repairs.
For example, if exterior repainting needs to be done every 12 years and water pipes replaced every 30 years, enough money needs to be put aside each month for these essential repairs.
Unfortunately there are a number of cases where the amount in the reserve fund is insufficient. This can happen when the repairs required have exceeded initial estimates, or when costs have risen to unexpected levels (which is currently evident with a steep rise in material and labour costs). Developers may also be to blame by intentionally setting repair fees at low levels in order to attract buyers.Read more
Know the basics before investing in real estate
Lately there has been a surge in the number of real estate-related books and seminars encouraging ‘salarymen’ to invest in one-room apartments as a way of securing an extra source of income. These promotional seminars were also very popular during the bubble in the late 1980s.
As a result, real estate listing site Rakumachi, which specialises in investment-type properties, has seen the number of registered users increase by 60% to 36,672 users over the 12 months to July 2014.
Low interest rates, a reduction in inheritance tax deductions from 2015, and concerns about a stable income after retirement are causing people to turn their attention to the property market.
But before parting with several million Yen, first-time investors must make sure they are fully aware of the potential risks involved. Rather than expecting quick and easy returns, investors also need to have a long-term outlook.Read more
Profiting from investment apartments in Tokyo not so simple
Private investors with smaller budgets need to be aware that they face a much higher risk level when investing in Tokyo's real estate market.
While a budget of several hundred million Yen will afford you a variety of options, anyone looking to spend under 100 million Yen or even under 10 million Yen on real estate in Tokyo will either be looking at older blocks of flats (‘apaato’) in outer areas or single apartments in more central areas. These type of properties can be very risky for investors, simply due to the high supply and risk of relying on a sole tenant. Read more
How to avoid dodgy construction work
On February 1, Mitsubishi Jisho Estate announced that they had discovered a construction fault with a luxury condominium complex they were developing in Minami Aoyama, Tokyo. A short while later they announced plans to demolish and rebuild the 86-unit building.
In March, it was reported that Sekisui House found some construction issues with a 30-storey high-end condominium under construction in Shirokane. Concrete pillars were found to have no rebar and are being replaced. No construction delays are expected.
In early April, Mitsui Fudosan Residential announced that Park Tower Shinkawasaki would be partially demolished and rebuilt after the lower floors were starting to crack under pressure from floors above. Construction of the 47-storey tower began in November 2013 and was scheduled for completion by March 2015.
With the two-stage increase in the consumption tax, shortage in labour, growing construction costs and high demand for new apartments, could we see more and more of these cases?Read more