Are you planning to come to Japan? If so, how about trying to invest in real estate?
If you are currently thinking of purchasing a property, wait a second and hear me out first!
Buying a property in your country isn`t a bit pricey? This article is mainly aimed to Taiwanese/ Hong Kong residents, but the information might apply to residents of countries where rent prices have not risen in comparison to the surge in real estate prices (such as China, the United States, the UK, India, Singapore, Australia etc.).
If it applies to you, stay with us a bit longer for more information.
According to the data comparing the prices of luxury houses in each city (“Real Estate Price Rent Index of April 2018” of the Japan Real Estate Institute), the area occupied by high-end class apartments in Tokyo (Minato-Azabu, Minato-ku) has a sale price of 100.0., while for Hong Kong the price goes up to 193.9 and Taipei is 122.0. Both Hong Kong`s and Taipei`s price for property is higher than Tokyo`s.
I ask you then: If that is the case, instead of buying a flat in either Hong Kong or Taipei, why not getting one in Tokyo?
You might be thinking: Well, if I do that, where am I supposed to live?
How about buying an apartment in Tokyo and lend it? You can also rent a place in your country and use the rental income from your Japanese property to pay your bills in your country!
How does that sound?
Anyhow, it is important to know what level the real estate and rent price are in your home country in parallel with Tokyo.
According to the data above, when cost for the same high-end apartment in Tokyo (rent per unit area) is 100.0, for Hong Kong is 162.6 and Taipei, 63.8.
The rent / selling price is 100.0 / 100.0 = 1 for Tokyo, 162.6 / 193.9 = 0.84 for Hong Kong, and 63.8 / 122.0 = 0.52 for Taipei. The smaller this number, the better it is to rent rather than buy it. Conversely, the bigger it is, the better is to buy than to rent.
In other words, think of it this way “I can buy an apartment in Tokyo and lend it to a person, then I rent an apartment in Hong Kong or Taipei with the rent income I get from the apartment in Tokyo” … it seems to work, doesn`t it?
If you compare the real estate yields around the world, you can also find the following statistics:
According to the World Global Property Guide, in the major regions of the world, real estate productivity is the lowest in Taiwan, 1.6%; Hong Kong is also lower than North America (3.9% in the United States, 3.7% in Canada) and Europe (3.2% in the UK, 2.9% in France) 2.8%. In contrast, Japan is 5.0%, so it is a country that yields in real estate management compared to other major countries.
Of course, when considering the income return of investments, it is necessary to consider:
(1) the tax system of the investment in the target country
(2) the domestic tax system
(3) exchange rate fluctuations of the currency in the target country and the target country itself
(4) the real estate price of the investment in the target country.
※ ② as the domestic tax system differs depending on the tax system of the targeted country, the income of the reader, the composition of the family, I will omit it in this article.
First, regarding No. ①: the income from Japanese real estate owned by you (a non-resident of Japan) will be withholding a 20% tax for rent according to the Japanese tax law. However, it can be refunded and here is how: as a cost it can be deducted from rental income such as the cost paid for acquiring real estate (real estate acquisition tax, registered expenses, brokerage fee, occasionally travel expenses may also be deductible) and management fees of real estate etc.
In addition, nonresidents are required to appoint a tax administrator here in Japan, whose role will be to declare the income tax and tax payment procedure on their behalf, so it is necessary for these expenses, but it can also be deducted as necessary expenses.
You can deduct the real estate management fee and tax administrator’s expenses after the second year. Also, once a year, there is a possibility that traveling costs to Japan will be recognized as necessary expenses (please consult with the tax administrator).
Therefore, 20% of the paid withholding tax may be refunded as necessary expenses. However, 20% will be deducted, so if you set the gross profit to 5% as mentioned above, the net income will be 4%. Still, it is much higher than Taiwan’s 1.6% and Hong Kong’s 2.8%.
Next , No.③ and ④ : Ideally, in comparison between the time of acquisition of real estate and the time of sales in the future,
A) the Japanese yen is getting stronger while the local currencies slowly depreciate
B) the real estate in Japan rises
C) if the real estate in your country gets weaker, rather than buying real estate there, you can buy real estate in Japan, sell it in the future and buy real estate in your country.
That way, you will be able to buy a property with a much higher value.
A) It is very difficult to forecast the currency rate as it is a world-wide money exchange and we are facing a RoRo(Risk on /risk off )situation. The investors around the world risk on and aim for stocks and real estates. There is a possibility that the yen goes up if this turns into a state of risk-off after turning over due to the economic downturn and rising some risk in the future.
Also, in such a risk off state, C) The real estate in Hong Kong/ Taiwan, said to already be prisoners of an economic bubble, is very likely to fall.
If that happens,..
B) The real estate in Japan is expected to decline, but due to the after effects of the bubble in the `90s and the low birth rates and decline in population, the risk is incorporated in the real estate price.
For that reason, the decline in B) may not be bigger than C).
OK… so my question is …
How do I get a property in Japan?
Although it may be quick to talk to a real estate company in your country, most likely the properties they are dealing with are not that popular or available as the Japanese companies usually handle most of the popular ones and it gets sold very quickly.
Think of it this way: let`s say a Japanese person wants to buy a good property in Hong Kong/Taiwan or any other country… Do you believe that looking for it in a Japanese real estate company rather than a company from that country is better? Most probably, that person won`t be able to find an excellent property by turning to a Japanese company to look for it.
Even so, isn`t it difficult to get in touch with a real estate company in Japan?
Yes, might be! However, we suggest you participate in the following real estate seminar while on a trip here! This seminar is a joint seminar aimed to foreigner customers held by
Real Estate Japan and LINC and it is introducing/selling Japanese properties.
As the staff can speak both English and Chinese, you don`t need to worry about communication, either.
The seminar venue is close to Tokyo Tower, so why not consider purchasing a Japanese real estate as you visit Tokyo Tower?