Three Arguments For and Against Investing in Japanese Real Estate

[oksana126]

The past couple of weeks I've been obsessed with the Japanese real estate market.

Compared to all other OECD countries, Japanese real estate looks ridiculously cheap, and recent trends show a quick value appreciation!

Therefore, I decided to do my through research and produce two articles/podcasts on the subject.

• The first article discusses three arguments For investing in Japanese real estate: https://konichivalue.substack.com/p...?r=xq4be&s=w&utm_campaign=post&utm_medium=web
• And the second article discusses three arguments Against investing in Japanese real estate: https://konichivalue.substack.com/p/should-i-invest-in-real-estate-in-fe0?sd=fs

Please feel free to read them and tell me what you think, or just post here what you think in general about Japanese real estate:

 

[invisisole]

@oksana126 So which of the two sides are you on? (If this is your thing, your opinion on this matters to your reader. It's part of the value you bring.)

 

[oksana126]

@invisisole I'm actually super torn. When checking the data points to strengthen my arguments for buying real estate in Japan I was super positive: It's undeniable that Japan, especially in major cities and tourist hot-spots, is super undervalued.

However, the arguments against paint such a vivid picture I feel it's a bad investment: An aging population, so many natural disasters and the 92 asset bubble still looming large just makes you hesitant no matter what the present data says...

Comparing Japanese real estate to stocks, its like a tobacco company: Amazing dividends and way undervalued, but people still do not want to touch it because of the stigma surrounding it.

My final conclusion (with mostly anecdotal evidence) is that if you live here, the best real estate investment you can do is to buy a house in a tourist hot-spot that you can use and then rent out during high-seasons. Sure, monetarily not as attractive as renting a place full time, but people are willing to pay bank for a hot place to stay during GW and long weekends!

Buying real estate to live in is also a good investment, but the rent market is relatively cheap and if you rent and a huge earthquake damages the place, you can just move.

Investing from abroad is not a bad option either to be honest, but then I'd consider just buying land to hold on to, to not be exposed to the high depreciation of property prices here.

 

[oksana126]

@invisisole I just published my final thoughts on if I think you should invest in Japanese real estate here

 

[glamer85]

@oksana126 RE in Japan makes money through cash flows rather than appreciation, that’s why you see much higher cap rates than somewhere like Vancouver, but it’s hard to say which would be the better investment. There are definitely ways to make money off real estate here but I would say it’s harder to find gems that can hold its value for 5-10 years depending on your investment horizon

 

[oksana126]

@glamer85 This is very interesting! Would explain why tenants here are still so OK with key money, brokerage fees and contract update payments...

 

[jaeb]

@oksana126 The key point that I did not see reflected in either article is the fact that in Japan, only land holds value. Structures, due to changing earthquake safety regulations and other reason, lose value over time- something that is not true in most other nations.

If you do not take that into account, that only land has value, and you pay for a structure that loses value over time, you'll be alongside most other Japanese homeowners who end up only with land that has value.