Market & Areas

New-build and secondhand prices behave differently

In Japan, the price of newly built housing tends to fall significantly after handover. This is because the premium attached to being new is built into the price, and that premium is lost as soon as anyone has lived there.

A secondhand property, by contrast, has already been through that adjustment by the time you buy it. Both price and rent are relatively settled and less prone to large swings, which makes it easier to forecast income and expenditure in an investment aimed at rental income.

High transaction volume means an accessible exit

The secondhand condominium market in the capital region has a high transaction volume, with a steady level of sales concluding at all times. The fact that buyers are readily found means that you can sell when you wish to sell. In investment, the outlook for the exit (sale) matters as much as the entry (purchase).

Rents move less than prices

Rents fluctuate more gently than property prices and tend to be less sensitive to the economic cycle. The relationship is that yields fall when prices rise, and yields rise when prices correct. Please treat this as a guide when considering the timing of a purchase.

Clear ownership, with no restriction by nationality

In Japan you can acquire freehold ownership of both land and buildings, with no time limit. The rights you acquire are made public through registration at the Legal Affairs Bureau and are protected by law.

Nor are there any restrictions based on nationality or residence status on the acquisition of Japanese real estate by foreign nationals. Even if you do not live in Japan, you can own property in your own name. This is the point our overseas investors ask us to confirm most often.

Diversification into a politically and economically stable country

Concentrating your assets in a single country and a single currency is itself a risk. Placing part of your assets in a country whose institutions and society are stable is an effective option for protecting your holdings as a whole. Holding yen-denominated assets also contributes to currency diversification.

Stable rental income over the long term

Japan applies strict standards for the durability and safety of buildings, and with proper maintenance a building can be let over a long period. Japanese lease agreements are typically renewed on a two-year term, and it is common for tenants to stay for a long time, which makes income easier to forecast.

The gap between yield and funding cost (yield gap)

Where an investment is financed with debt, the difference between the rental yield and the borrowing rate is the source of the return. The wider that difference, the higher the return on your own funds.

Neither interest rates nor yields are fixed, however. If rates rise the gap narrows, and with a floating rate your repayments may increase during the holding period. When considering a purchase, please model the figures on the terms available at that time and also review how the income and expenditure would look if rates were to rise.