Saturday, October 13, 2007

Tokyo Real Estate Prices on the rise - The sun isn't the only thing rising in Tokyo

The sun isn't the only thing rising in Tokyo
A Global Megacity; Property Prices Climb As Japan Escapes Long Slump
Shane McGinley
Financial Post

It's not the crazy '80s when prices for real estate in Tokyo rose by more than 270%, but things are looking bright in the Japanese capital. After years of weakness in the property market, prices have increased in the past few years.
CREDIT: Yoshikazu Tsuno, AFP, Getty Images
It's not the crazy '80s when prices for real estate in Tokyo rose by more than 270%, but things are looking bright in the Japanese capital. After years of weakness in the property market, prices have increased in the past few years.

It enjoyed a boom in the '80s, went bust in the '90s, but with property prices on the increase, the sun is rising once again over Tokyo.

Where is it? Japan is an archipelago of more than 400 islands and lies to the east of China, Korea and Russia. The capital Tokyo is located on the island of Honshu along the coast of Tokyo Bay.

Why Tokyo? Tokyo is not only Japan's biggest city, but a global megacity. According to the UN, it is the most populous metropolitan area in the world, has the largest GDP of any city and was just recently bumped off the top of the list of the world's most expensive cities. The Tokyo Stock Exchange is the second largest in the world after New York. Prices in Japan's six biggest cities are recovering from a 15-year slump. According to the Global Property Guide, prices grew by 4.1% in 2006 and by 7.75% in first half of 2007.

Best-kept secrets? Ivan Doherty, from finance company IFG Group, believes the best element of Tokyo is "without question the people. Japanese are very polite, easygoing and non-confrontational, and the country has a very low crime rate when compared with Western countries. It is a very easy place to live even, without an ability to speak the language."

Who's who? Regular famous faces in Tokyo include the Beck-hams, Tom Cruise, Cameron Diaz and, of course, Scarlett Johansson put it on the map in Lost in Translation.

What's the property market like? After the Second World War, Japan ascended to become the world's second largest economy. In the '80s, property prices in the six biggest cities rose by 272% and the stock market index grew by 542%. The property bubble burst in the '90s, causing a financial crash. Since 1991, residential house prices across Japan dropped by 42%. But in the past few years a recovery has begun and in 2006, prices grew by 10.4% on average.

Mr. Doherty believes that a weaker yen makes Japanese property a draw for foreigners, although interest rates are set to rise in the next six months. Traditionally, it has been difficult for foreigners to get mortgages in Japan, but several banks will now organize this for buyers.

Buyers guide There are no restrictions on foreigners buying property in Japan, but there might be linguistic and cultural barriers. Hire a local agent to represent you. They can be sourced through the Real Estate Companies Association of Japan and charge about 3% plus ¥60,000 ($551). The agent will draft a Juyoujikou Setsumeisho or Property Disclosure Statement, and when the deal is completed, a 10% deposit is paid and the title is transferred. Title registration can take about two weeks. Those planning on investing more than $2-million can appoint a notary to set up a Special Purpose Vehicle to register the property title on your behalf if you cannot be there in person. This can take about four to six weeks.

Where to buy? As Japan's population ages and shrinks, it is expected people will move closer to the city. So, be sure to buy in the city centre, inside the Yamate Dori ring road, to ensure land values don't decrease. Trains are vital and any property should be a five-minute walk from a station.

What's the rental market like? A strong rental market means that occupancy rates in central Tokyo are very high. The Global Property Guide pegs average monthly rents in the city centre at $2,445.62 for a 50-square-metre apartment to $7,249.58 for a 150-sq.m apartment. Rents decrease the further away the property is from a train station. Also note that rental management fees are high in Tokyo.

What's the resale market like? Tokyo buildings typically have a short lifespan. After 10 years it is common to completely renovate a property, and after 20 or 30 years, to demolish and rebuild. The second-hand market is not very liquid but developers may be keen to buy older buildings to renovate them.

What type of property is available? Local demand is high so properties are rarely advertised. An agent on the ground is essential. Houses are the best buy as you control the land. In an apartment you need the agreement of 85% of the building's owners before it can be demolished and rebuilt.

Average property prices? Global Property Guide data shows the average price of apartments in the centre range from $498,258 for a 50-sq.m unit to $1,849,285.46 for 150 sq.m.

Taxes & costs Purchase costs on a new property are around 4%, 7% on older property. Tax allowances are available depending on the size and age of the building.

FAST FACTS

Area 2,187 square kilometres Population 12.5 million Currency: Japanese yen ($1 = ¥109) Weather: Pacific climate with temperatures from 4C to 27C. Transport Tokyo has two main airports and is the transport hub for Japan. Rail transport is key and the extensive train network is fast, clean and efficient, although often crowded. Expressways and ferries link the city to other urban areas and islands and taxis are also common. Going out As a megacity with 23 different "wards," Tokyo is very diverse. In the city centre is the Imperial Palace, the nightclub districts of Roppongi, Kabukicho and Ebisu. Eating out Tokyo is the birthplace of sushi and the markets of Tsukiji are famous for it. There are thousands of restaurants catering to every palate. Fast-food outlets are plentiful; Japan has the second-highest number of McDonald's restaurants in the world. Shopping Tokyo is a mecca for electronics, funky fashions and antique furniture. Akihabara is best for electronic stores, Shibuya and Harajuku for fashion, and Seibu and Tobu are some of the largest department stores in the world. Tokyo agents - Housing Japan Inc.: www.housingjapan.net - Plaza Homes: www.plazahomes.co.jp - Real Estate Tokyo: www.realestate-tokyo.com

Useful contacts - Canadian Embassy in Tokyo: tel 81-3-5412-6200; tokyoconsul@international.gc.ca - Japanese Embassy in Ottawa: tel 613-241-8541; www.ca.emb-japan.go.jp - Real Estate Companies Association of Japan: tel: 81-3-3581-9421; www.fdk.or.jp

Search the MLS or read more about Interest Rates, Power of Sale Properties, Price Trends and more at my website. Homes for Sale

Thank you for reading my blog and if there is anything else I can help you with please don't hesitate to contact me,

Mark

A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate



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