Investing in property in Japan doesn't make sense to me
Unfortunately property in Japan is somewhat unique and I don't think it makes sense to invest in it at the moment. I have tried to make it work, but no matter how I do the sums they just don't add up.
Now, if you want to buy a place for you or your family to live in, that makes perfect sense to me. Just be aware of why you are doing it, do the maths and figure out how much it is going to cost you over the period of time you live in the house, and make sure you are happy with that before committing to anything.
The benefits of buying property in Japan
- low interest rates
- older properties are heavily discounted if you are buying second-hand
- favorable tax treatment of mortgages
The drawbacks of buying property in Japan
- buildings depreciate to ￥0 over 20-30 years
- the demographics indicate a future collapse of land prices
- current zoning laws artificially inflate land prices but could be changed in the future
- high property taxes
- low rents
- renters enjoy considerable protection under the law
- natural disasters can damage or destroy buildings, insurance can be difficult to claim in that situation
- Japan's social and political future is uncertain
Looking at the above, I think the financial case against buying is strong. I may be biased having experienced the earthquake in Sendai a couple of years ago, but I am much more inclined to rent and invest any extra money.
A couple of years ago I started investigating the possibility of buying property to let in Sendai. I found that the yields on apartments and 'mansions' were so low that again, it made little sense to me to buy -I could get a better return with much higher liquidity and less risk elsewhere.
Unfortunately, it seems to me that property as an investment in Japan is a non-starter.
What do you think? Let me know in the comments.