There is a lot of incorrect and misleading English information about the Japanese real estate market. The quotes below from a since-removed article from PropGoLuxury.com are typical examples 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”
The Global Property Guide 2009 list with the above $/sqm price is here, and states the average apartment price in Tokyo as USD$17,998/sqm (1,500,000 JPY/sqm). At the time of this article, average prices in the metropolitan area were closer to a third of this amount. In central Tokyo’s 3 wards (Chiyoda, Minato and Chuo), the average sale price per square meter in November 2014 was 966,600 Yen/sqm. High-end apartments can range in price from 2,000,000 ~ 3,000,000 Yen/sqm and easily above, but do not represent the entire market.
Using the price-to-rent ratios, the Economist house-price indicators have showed 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.”
The 30 year lifespan figure is actually the average age of a building when it is demolished. Buildings are demolished for a number of reasons, such as redevelopment. Through proper maintenance and repairs a house can last much longer, but with low construction costs and changing lifestyles and family structures, many homeowners or buyers find it easier to rebuild.
“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” – VERY 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 totaled 10,835 (average price of 30 million JPY), while only 3,472 new houses were sold (average price of 35 million JPY).
In 2016, 2017, and 2018, annual sales of second-hand or ‘existing’ apartments have exceeded new apartment supply across greater Tokyo.
“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.”
- Some apartments in Roppongi Hills Residence A & B units (and sometimes Residence D) are for sale while Residence C is only for rent. Tokyo Midtown is for rent only.
- Prices in Mitsubishi’s project – Azabudai Parkhouse – actually started from 65 million JPY (US$776,000 at the time) with the most expensive unit at the time priced at 840 million JPY (US$10 million at the time).
“Location, in particular proximity to a subway station, is an absolute requisite for luxury residences in Tokyo”
NOT ENTIRELY TRUE
Location is key. Convenience to subway and aboveground stations is important, especially when trying to attract tenants for an investment-grade property, 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 desirable as a residential area compared to the area directly around the station.
“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.”
At the time of the article, HSBC Premier was already offering mortgage products to Premier members living in Japan regardless of the real estate agency they used. The National Australia Bank was also providing financing to foreign residents in Japan.
*Update: In 2011, HSBC Premier Japan stopped offering home loans in Japan. In 2015, the National Australia Bank limited lending to existing clients only, before later ending financing options.
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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