someone please explain how Japan housing is protected from becoming investments for foreign money?

23 comments

1. It is not, with some rare exceptions

2. It isn’t.

3. I’m not an expert at all so happy to have myself corrected, but my impression is that houses here are built as consumables, not investments. Interiors are all the same, quality is medicore, lifecycles are short.

4. What. So many things weird about this. Firs toff, look at prices in Tokyo and compare them to 3 years ago. 10 years ago.

   Does your city I’m Canada have frequent earthquakes and typhoons that damage houses?

   Is Japan’s population going up or down? How about Canada’s?

   You can go live in the middle of nowhere in northern Manitoba and probably find something shittily built and cheap and old. Can you compare that house to a house in Vancouver?

   Same goes for japan. Tokyo prices are on the rise and houses in the middle of nowhere are down. Damaged old houses that were hastily built also hold little value in japan, but land values don’t seem to drop much inside cities and often seen rising values.

5. Mansion prices in Tokyo say otherwise.

6. the cheap houses are not so cheap when you try to patch them up and then the land taxes hit. Also, they are located in the middle of nowhere, so nobody wants them. Good property in good places isn’t cheap.

7. Also the government is supposed to cracking on down on foreigner’s ability to own property. So in the near future this business of non-residents/citizens buying up all the Akiya could be a thing of the past….

8. At this time, it’s not currently protected. Lately, the same thing has started to happen in Tokyo that happened in Vancouver.

   Due to the weak yen, a bunch of foreign investors came, and over the past 3 years or so, prices in Tokyo have gone up over 50% on average, iirc. Average price of apartments are now over 1 million as well.

   I was also priced out of my area in Canada, and got priced out of the area I lived in Tokyo as well.

9. Definitely isn’t.

   Everyone basically moves to tokyo or to major cities.
   Tokyo housing is ridiculous now.
   An 3ldk (5 1/2, maybe in Canadian terms), goes for like 1 million cad or above.

   Usually the houses bought for cheap are in the countryside.

   One of the benefits I guess is mortgage is 35 years with relatively lower interested rates than Canada.

   But basically in Canada, if you make less than 150k cad, you are basically poverty.

10. The reason housing in Canada is expensive is bcz everyone wants a big backyard and because boomers attend local council meetings and block apartments and building high. 

    The size of starter Japanese apartments would be illegal in BC and when we lowered the minimum sqft of an apartment recently (still above Japan size) everyone online complained “DO THEY WANT US TO LIVE IN A SHOEBOX???”

11. It isn’t, but since the value of house goes down, since the moment it is built, investing is rather difficult. But the land is very valuable and it constantly goes up.

12. In Japan, for a house, except for really desirable locations, the value is in the land, not the structure. Especially if it’s more than a few decades old. I just bought a house in Nagasaki for ¥3 million, between $20k and $25k. I bought it to live in – don’t think there would be much profit in renting it out.

    Foreigners more often invest in condos (manshons) that they then rent out. I have a friend who helps foreigners buy and manage such properties. According to him, the annual return is up to 5% or so (if I recall correctly). In older buildings, sometimes you get lucky (bought out) by someone who wants to tear the building down and build a new one.

13. Yo it’s not “the others” that are ruining housing worldwide, it’s private equity and vc firms consolidating everything under one umbrella. Then it’s jack up prices, slice maintenance and quality of life, and of course fund reactionary politicians to blame everyone else for the disaster they cause. It’s short term greed ruining long term economic viability, and it’s such a big problem. Unfortunately they’ve gotten good at getting finger pointing going in every direction but the right one.

14. Because we actually build housing. If foreign investors pump 1 trillion dollars into buying housing in Japan, we’ll just build that much more housing. My Tokyo neighborhood has built like 5 tower mansions in the past 5 years, and that’s on top of a bunch of big single-family houses getting turned into small mansions.

    I have friends in Meidaimai, and seeing the sheer scale it’s gotten built out in a few years has been astonishing.

    With Canada, there’s a bidding war because new housing isn’t allowed to be built and tons of population growth. Here there’s tons of housing getting built and a shrinking population.

15. It’s the nature of the Japanese market; it’s not easily controlled locally and thus it’s difficult to reliably influence your investment’s values. 

    The reason housing in Canada, and other similar countries, gets so expensive is the runway effect of local zoning laws; most local voting populations want to increase, or at least protect, the value of their home and will vote for stricter zoning laws limiting supply and anything else that could reduce home value (NIMBY).  

    This is great for investors too, as they know the local government will do the work of increasing their investment values.

    However in Japan, local governments aren’t given the same authority over zoning laws; there’s no way for locals to restrict housing supply and enforce strict zoning laws. 

    This makes the investments difficult to protect and predict, and lowers their value. And eventually housing is no longer seen as an investment and “future gains” are thus no longer priced in. 

    Add to this that due development in high seismic activity, move buildings aren’t incentivized to last longer than a few decades; as they will weaken over time and regulations will change.  This means if you want to be a property investor in Japan, you’ll have to put more effort into maintenance and rebuilding, something foreign investors are allergic to. 

    It’s not a guarantee it won’t happen, after all the bubble era saw massively inflated housing prices in Tokyo, but it has many more downward pressures on housing that other countries do not.

16. There are only financial protections. No legal or regulatory protections.

    The only barrier is that special tax deductions and low interest rate home loans are only available to people who purchase property and live in it. Purchasing property for rentals require real estate investment loans which has higher rates and more rigorous screening criteria.

    However if you just pay cash, then none of that applies and it goes down to whether the individual owner is willing to sell to you.

17. There are some unique differences between Canada and Japan when it comes to housing:

    * Inheritance tax. If you inherit a big expensive house, you need to pay the tax bill at the time of death. This usually leads to liquidating a part of the property to pay the bill if you don’t have the cash to pay all at once
    * Houses are a depreciating asset. The land generally holds onto its value, but a wooden house will eventually go down to zero after 22 years. Condos/mansions are different though
    * Mindset – people don’t treat their house purchase as their retirement fund (nest egg) like Canadians do. Canadians are more likely to struggle through an expensive mortgage knowing they’re “building equity” but that’s harder to rationalize when you know your new house will be worth zero after 22 years. Here, the game is to utilize your 住宅ローン控除 (mortgage tax deduction) while stretching out the length of the loan as long as you can; if you die the loan gets paid off instantly

    The condo/mansion market in Tokyo seems to show that prices have clearly become inflated, but compared to Canada where that type of price appreciation can also be found in minor cities I personally don’t worry too much about it. The declining population also has a heavy impact on the demand side, where almost anywhere outside of Tokyo will see population decreases in the foreseeable future.

18. Depopulation protects the countryside.

    Tokyo is paradise for people with bags of JPY: no protection whatsoever as illustrated by price skyrocketing past few years in a few top locations.

19. tell your government to stop mass importing in Indians and house prices will go down

20. Economics protects it, to a degree. But close to no regulations.

    Canada’s housing market got F’d by incentives to buy and keep as investment. That isn’t the case for Japan. Apartment prices in Tokyo might balloon short-term, and luxury “tower mansions” will be out of reach for the vast majority of locals. But, builders will keep on building, eventually diluting the market.

    Earthquakes and maintenance also makes housing a not so great long-term investment. A single earthquake, typhoon, or even an especially wet and humid summer can tank a home’s value in an instant. The longer you hold without selling, the higher the risk. Currently, it’s only the cheap yen and bubble markets overseas keeping it viable at all even with these risks.

21. Just to clarify, it wasn’t only foreign investment that created the situation in Canada. People have been using their homes as retirement savings for a long time.

22. Houses in Japan are ***depreciating*** assets. 

    It’s because of the natural disasters.

    Real estate influencers don’t know what they’re doing, and they won’t last long. They might be able to sell to dumb foreigners who don’t care about safety, but that’s about it.

23. It isn’t. A lot of Japanese housing is just not desirable to foreigners for living. Whether they make good investment vehicles or not is highly dependent on a few specific locations. Foreign investment has seen an influx in the last few years due to the yen turning into Monopoly money.

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