Buying Real Estate

What is Hida-Takayama in Gifu ? Why so many Jewish people visit there ? : Will you be ready for investment in private lodging (minpaku) property ?

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(Historic village in Hida-Takayama)

It is not secret that Japan is a surprising combination of peace and chaos, old and new and has just the right amount of anorak.
Inbound tourism continues to thrive as a record 28.7 million tourists visited Japan in 2017, up 19 percent from the previous year and apparently keeping the nation on track for the government’s target;40 million in 2020.
Challenges remain such as a tight supply of accommodations that cater to overseas guests and a heavy concentration of visitors from East Asia. 
According to JNTO (Japan National Tourism Organization), the estimated number of international travelers to Japan in April reached to 2.9 million with an increase of 12.5% compared to the previous year, recording the best April ever. The estimated number of international travelers to Japan in 2018 reached to 10 million (+15.4% from 2017).

(Number of Inbound tourists by year)

(Inbound tourists by country in 2017)

That said,  Hida-Takayama　(飛騨高山）has become one of major tourist destinations among the foreign tourists
but it is not that popular destination for average Japanese.
I have recently read an interesting article about Israeli tourists in Hida-Takayama and would like to share the Takayama city’s
strategy how they become one of the most popular tourist places among foreigners especially Jews.
According to Takayama city statistics, the number of Israeli visitors has increased from mere 2,833 in 2013 to over 10,000 mark for the first time in 2016. The number has more than triple. 
Total number of Israeli visitors to Japan during 2016 was about 30,000 so one-third of them visited Takayama.
In 2017,  the total number of Israeli guests to Japan increased to 32,000 from previous year (up 7%)

(Chic Hida-Takayama old town village with historical kominka)
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Waterfront century-old Japanese kominka (traditional Japanese folk house) in Atami, Shizuoka prefecture: How was it dismantled and transferred ?

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(House)                                                              (Living room with ocean view)

I recently visited a beautiful Japanese kominka (traditional Japanese house,古民家) in Atami with
a business parter who actually renovated into the perfect condition.
The house was build only in 2017 but it used the old timbers from a century-old house in Nagano prefecture.
The current owner dismantled an old house in Nagano and transferred to Atami(熱海）and restored it completely.
Here is the traditional Japanese style house and how it is restored.
Property


It sits in Atami in Shizuoka prefecture.
It has a great access; only 2 hours away by car from central Tokyo and about 80 km from Mt.Fuji.
It is the ocean view house where you can enjoy the sea breeze and spectacular Pacific Ocean and the Sagami Bay.
(See the map below)
Located on a high ground in good sun and good ventilation.
Land over 10,000 m2, building over 270 m2.
Front road 7.6 m and 3 parking lots (more space is available for parking lot)
The beautiful unique Japanese old folk house (called kominka ‘古民家’) sits at the foot of the Izu peninsula.
The grand waterfront house originally stayed in a family for more than 90 years in the mountain side of Iiyama city in Nagano prefecture, and it has been well preserved.

(Map)

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How to avoid buying a house with problems in Japan : Tips for detecting a malicious defect in your property

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While inspecting any property is important, it becomes even more uppermost to check for defects found in second-hand property especially akiya (空き家abandoned houses)
In Japan’s real estate industry, it is generally assumed that there are four types of risks of ‘defects’ （瑕疵）the industry professionals usually recognize.
They are physical defects, psychological defects, environmental defects
and legal defect (issues).

1. What is a physical defect?
Physical flaws are situations where the building leaks, termites occur, and the earthquake resistant strength is insufficient.
Some common physical issues
For example, with 8 million akiya (Abandoned house, 空き家),
old houses are usually very affordable in Japan these days. However, those old houses could also come with a lot of issues that you may not be prepared for.
What seems like a great deal at first may ultimately cost much more than you originally thought.
It is always recommended to do your research before investing in real estate, particularly when the property in question is old property.
The following checklist will give you an idea of what issues to watch out for when buying a second-hand property especially an older home.
Due diligence always pays off.
You want to avoid common physical defects, problems with the construction structure. 

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A solution to the hotel shortage ? New minpaku (民泊, private lodging) law in Japan : How does it work ? and how can you tap your property ?

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I have a friend who has enjoyed hosting international visitors in Tokyo in her
own condo.
She has been hosting international visitors in her spare two-bedroom apartment
but will have to stop it because her building association (管理組合）has decided to
ban the minpaku business ahead of the law’s
enactment in June 2018.
She was able to meet many different people she would have not met otherwise.
A lot of foreign friends have been asking me a question about minpaku (民泊、private lodging) in Japan.
Today I am going to discuss the basic knowledge about minpaku and minpaku law
set by the government in 2016.
How does the new minpaku law work ?
What is the implication on the real estate industry ?

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High yielding, guaranteed rent should be too good to be true ?: ‘Kabocha no basha’ subletting problem in Japan

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Pitfall of sub-leasing(sub-letting) real estate investment

High yielding, guaranteed rent（sub-leasing)  should be too good to be true ?
Recently one of the scandals which rattled the industry is KABOCHA-NO-BASHA
(Pumpkin Carriage) problem.
The background of the scandal is as follows.
Investors were guaranteed a fixed monthly amount over an extended period if they invested money by contracting with a real estate company called Smart Days(Tokyo)
that used the funds to set up and manage share house facilities under sub-leasing agreement.
Since 2015, Smart Days, operator of women-only share houses called Kabocha no Basha (Pumpkin Carriage), has promoted high yield investments through the media and has mainly acquired customers of office workers. In the sub-leasing contract, rent payment collected through the sub-leasing is sought to pay back the debt for a long period plus small profit.
For example, suppose you borrow 100 million yen from a bank and the monthly repayment amount is 500,000 yen, if you earn rental income of 550,000 yen a month, it will generate 50,000 yen a month profit. This system is typical leveraging in the real estate investing and there is no red flag about it.
In an ideal setting, Smart days as the sub-leasing company would rent out rooms to tenants and bring in a steady and continuous supply of rent, a portion of which would go to the investors.The shared house with shared toilets and bathrooms is not as wide as 7 m² in living space, but the initial cost of moving in is kept low (so they say), and it was expected that more women moving into Tokyo from rural cities will choose to stay in these share houses.Smart days also promoted the business to support tenants finding a job (This is an alarming part)

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Hidden Defects : Risks in private real estate investment in Japan (Part1)

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There are risks associated with any investment – loss of capital, finance, leverage and liquidity risks and so on.
Not like buying the paper assets such as REITS, many of these are only relevant to the direct investment (where the investor invests, owns and has control over the real estate asset).
This article will highlight the main risks associated with investing in real estate in Japan and provides commentary on how to analyse and mitigate these risks.
Today I am going to discuss the risks at time of acquisition.
Unlike regulated industries such as accounting and financial planning, working for a property company (as distinct from working as a traditional real estate agent),
does not require a great deal of education, experience, or study prowess. Marketing investment property requires nothing really but the ability to sell.
That is one of the reasons why there are unlicensed (often rogue )
‘property consultants’ in Japan.
Engaging in the marketing activity to lure the investors without holding a license is against the
Building Lots and Buildings Transaction Business Law. If your consultant or agent do not hold
the license, your contract is not protected by the said law.
For more information, please see my post on February 11, 2018.
Are there any rogue real estate agents in Japan ?
At the end of the day, even the good agents cannot guarantee the success of the investment and thus investors must learn the risks and returns
before they make a investment.

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Good opportunities ? : How does the booming inbound tourism impact the property market ?

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Japan is enjoying very healthy growth of inbound tourism.The number of inbound tourists, which stood only at 8.36 million in 2012, set record highs for the sixth year in a row. It continues to thrive as a record 28.7 million tourists visited Japan in 2017, up 19 % from the previous year. In 2016, it was up 21 % and in 2015, up 47 %.
Visitors from China, South Korea, Taiwan and Hong Kong account for more than 70 % of the total number.
The number of Chinese travelers grew 15% to 7.35 million, South Korea increased 40 % to 7.14 million.
2018 January number will be announced on February 16 but apparently it is keeping the nation on track for the government’s target of boosting the annual number of visitors to 40 million in 2020.
There are some challenges, however, that must be overcome, such as a tight supply of accommodations that cater to overseas guests and a heavy concentration of visitors from East Asia.
Further efforts should be made to realize the full potential of inbound tourism as one of the nation’s key growth industries including welcoming more American and European visitors
who have a tendency to stay longer with bigger spending budgets.
(Chinese tourists spend less than Europeans and Americans on accommodations and foods)

Japanese people are regularly talking about the latest inbound tourism booming but how does the industry look more in the global perspective ?
Is only Japan performing well ?
In order to analyze the Japan in the global market, let’s look at the 2017 report published by UNWTO (UN World Tourism Organization).
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Where you should buy your house in Tokyo ?

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Do you want to buy a house in Tokyo ? Which area do you want to buy your property  ?
I believe understanding the location is a key to being successful
with buying a house (or apartment).

In Japanese big cities such as greater Tokyo, Osaka, Nagoya,
people do not commute by car but by train or subway.
They get on and off train every single day.
If the number of residents increases, the station nearby flourishes and
the vibrancy is born in the town.
On the other hand, if the number of station users decreases, we could see the
recent issues like “vacant house problem”.
Empty houses problems are even becoming serious  in the area of Denenchofu station, Tokyu Toyoko Line,
which has been admired as said a prestigious residential area.
This is because the wealthy people who live in Denenchofu are moving into
high-rise apartments in the center of Tokyo.
When buying real estate in Tokyo,  it is extremely important to check the trend of
passengers of the nearest station.
Unlike large cities in the US and Europe, there are few business people
who commute to work by car in Tokyo.
The convenience of commuting to work and the convenience of shopping are directly
linked to the value of real estate in Tokyo.
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