Buying A Property In Japan

Japan is one of the few countries around the world that we Brits have not bought into en masse during the decade-long property boom that ran 1997-2007. Should we look there now?

By Gordon Miller

Elsewhere in Asia - Thailand, Bali, Vietnam, Malaysia and even Cambodia - property developers have seen Westerners knocking on (and buying up) their doors, but Japan has by and large been overlooked. The anomaly is primarily due to the price of property. The aforementioned countries are cheap by European standards, whereas Japan is not. In fact per square metre, Tokyo is sixth behind Monaco, London, Hong Kong, Moscow and New York as the most expensive city in the world. The price per square metre is US$13,814, according to GlobalPropertyGuide.

The second reason why Britons have resisted the siren call of one of the world's most distinct cultures is because, while house prices may be high, they are not very stable. In fact they have been falling since 1991 and, despite a brief rally in 2006 and 2007, are now lower than they were before the first great slump in the late 1980s. Japan's urban land price index for the six biggest cities dropped 6 per cent year-on-year to the end of the first half of 2008. This was in sharp contrast to the 8.4 per cent price rise during the same period in 2007, following a 4.1 per cent rise in 2006, according to the Japan Real Estate Institute (JREI).

As to the future, there appears to be little sign of a recovery in sight. The country is officially in recession, and the Japanese Government predicts that its economy will contract by around 5 per cent in 2009 due to falling exports in cars and manufacturing. GlobalPropertyGuide reports that sales of housing units have been constantly declining since 2004, with sales in 2008 dropping more significantly. And with Japan's credit markets frozen (making mortgages hard to find and expensive when you do), its housing market is expected to remain lacklustre for the next two to three years, even in major cities.