The Japan Question

Love japan so much that commonsense would go out the window...and i have blind faith that long term the country will open its door to selective mass immigration and incentives to grow the local population base.

 

@ATANG I can confirm that's still the case. It's called Key Money, and it sucks (landlords would disagree). It goes back to post-war Japan when housing supply was so inadequate those that could would pay large sums up front just to get a roof over their heads. It's generally a fairly arbitrary amount, one month's rent would be very conservative. One way to justify the expense is to mentally divide it up over the first 12 months rent payments to get the 'real' rental price.

 

@Lacrim The government has been offering incentives to stimulate the birthrate, one of which is supporting businesses running match-making websites(!). Those incentives have been running for a few years now and I'm not sure they've had any material effect yet.

As far as immigration goes, Japanese find the idea horrifying. I would count on them running their population into the ground – falling on the sword if you like – before allowing any real changes to immigration policy.

 

Its happening already. There are large numbers of foreigners. One town i went to, somewhere between Nagoya and Yokohama, had a large poplulation of Brazilians with many signs in Portugese. IN Roppongi there are large numbers of Africans running around, and large numbers of Chinese too, but they don't stand out. About 1% of the population are Korean citizens too. Large numbers of Philipinos working in hospitals too.

 

That's the big question @JDP1 . Part of it is psychological – ownership. Part of it is being able to knock down a wall here or there and drill holes in it. I have furniture and a car, so I need somewhere to put them while I'm back in Australia. You're right though, I could potentially just rent a place here for the next 35 years.

Rent
35 years x $25Kpa rent = $875,000.
In reality the rent price would fluctuate. Up or down is anybody's guess.

Buy (~$500k)
Purchase fees (10% of prop price): $50K
Deposit: $50K
35 years of loan repayments including 1.4% property tax and 1.2% interest: $796K
Total cost: $896,000

That's all thrown together pretty quickly but those figures are very close. As I've found from the research in my original post, if I bought the place the house would be worthless after 35 years, but the land would still hold some value, making a purchase seem like the better option.

 

So what is the property split?
Eg land 40% building 60%

 

My take would be as follows. Rent for the first couple of years and be absolutely 100% sure that your plan is going to be forever.
For whatever reason you and your wife my decide that Japan isn't going to be a good fit. If that were to be the case then if you just go out and buy you would lose your 10% plus selling costs.
I have seen a few and heard of many more to make drastic changes without first testing the waters and it's a financial disaster. How many people think a sea change is the answer only to discover the long commute back into town is not its cracked up to be, your friends and family don't infact come visit every weekend and a night out in town costs you an extra $300 in travel and accommodation.

 

It depends where you are buying. I've had friends buy in downtown Tokyo, and their places are up 20-30% in the last few years. One of them was running a airbnb type business, yielding 20-30% and, as you say, borrowing at around 1%. If I knew how to do achieve this type of yield in Japan, I'd take this any day of the week over investing in Aust.

Also, I wouldn't read too much into Japan's declining population. Even based on these so-called projections, by 2060, it will still have more than 3x Australia's population. And Tokyo population is actually increasing from what I understand.

More importantly, a lot can happen between 2017 and 2060. They thought Japan was going to overtake America in the 80s too, if you listented to these predictions. At the end of the day, all things are cyclical somewhat. Extrapolating current population trends to predict what will happen in 40 years is like throwing darts blind. Some years ago when Helen Clarke was in office, I still remember them saying New Zealand will never open up immigration either.

 

We're looking at houses around 40 minutes by train out of central Tokyo and the split is roughly land 120m2 building 100m2, or 25% / 75%, if you're lucky.

Even 40 minutes out of central Tokyo (https://goo.gl/maps/pnYvDDzK3uv) we'd really need to be spending ~$2million to get something that I'd consider an ideal home. Our budget is $600K, which gets us property like this: 【SUUMO】桜ヶ丘４（聖蹟桜ヶ丘駅） | 新築一戸建て・新築分譲住宅物件情報 (incidentally suumo.jp is Japan's realesetate.com.au). It's freshly built, but you can see why they knock them down and rebuild after 30 years. Flimsy as hell.

 

Why not just be done with it in 1 hit and buy a live aboard boat? A 40 foot catamaran should have enough space for a family of 3. If you're going to lose money on a house anyway why not be able to go see the world in it.

 

A quick look at Meguro (downtown Tokyo) shows $600K gets me an apartment with 45m2 floorspace. It is a great potential AirBnb investment, but woeful for actually living in.

Tokyo's population is increasing. This is true of major cities across Japan as regional areas die out and the population contracts into city centres.

Their predictions are less blindly thrown darts, more based on census data, such as total fertility rates steadily dropping from 2 births per woman in the 1960s to 1.2 births per woman in 2015. Hopefully it does turn around, but because we're talking in terms of lifespans it will take generations, and through that lens 2060 isn't that far away.

 

As long as it has wifi, I'm in.

 

I'm actually impressed at how high the quality of life in Japan is. $600k for an abode of that calibre. I'm not too sure if Meguro is a good place, but I can see it's in walking distance to Shibuya...

I was speaking to a Japanese friend last week, and she said no one wants to buy a house in Japan, not so much because they don't believe it will rise or fall in value. In fact they're agnostic to that. They just don't want to buy because culturally being a capitalist/entrepreneur is not something they want to do, what's considered important in Japan is having a good job at a place like Sumitomo or Itochu. Be interesting to hear your view on that.

 

A friend also bought in Tokyo,netting about 4.5% after interest and expenses. They were going to net a lot higher with Airbnb, but their building didn't approve it. Maybe you could look into Airbnb it for the periods you aren't there? But a bit more hassle.

 

Do you need to work in Tokyo? Why not try a large regional town or even countryside. Somewhere on a train line and you would still be close enough to the city.

What I don't like about Japan is the constant crowds and the lack of space.

 

It's interesting isn't it. She effectively says the average Japanese person has no interest in financial freedom. I'd be fascinated to see what she thought of Robert Kiyosaki's book Rich Dad, Poor Dad. It's ironic he carries a Japanese name because the similarities end there.

You can't blame them though. They haven't had the benefit of living in a society where "property values double every 10 years". On the contrary, they're making a significant loss when they purchase a property. Their mortgage repayments aren't forced savings like they are for us, they're a liability.

The housing market hasn't only made ordinary Australians wealthy but it's also given us an investor's mindset – our home gives us equity to play with. In Japan most people work like crazy to horde cash instead, and that's why working for life at places like Sumitomo is so important to them.

Definitely recommend reading this paper: http://www.nri.com/global/opinion/papers/2008/pdf/np2008137.pdf

 

Yes I work remotely and would happily live in the countryside, drinking green tea and listening to the bamboo sway in the wind (!). My wife needs the proximity for work though.

 

Plenty of Japanes people are interested in financial freedom. I have a few books on investing in property in Japan and a copy of rich dad poor dad in Japanese language. It is just that property investment in Australia is like a national sport, everyone is talking about it all the time, especially at the moment.

 

Fair enough to buy a depreciating asset for lifestyle reasons - I can totally understand that.

Maybe even borrowing money to buy such an asset - I wouldn't do it personally, but again I can understand there might be some good non-financial reasons to do so.

But you want to leverage to 95% LVR on a depreciating asset, AND want to aim to make investments in the medium term?

Those seem like ridiculous cross purposes.

 

The situation is the same as when I lived in Japan going on 20 years ago. What you mention is not Japan becoming "multicultural" at all.

- Those Brazilians are on Nisei visas. They have Japanese ancestors (Farmer workers who moved to Brazil). They are still gaijin and do low paid labouring work.

- The Africans "running around" in Roppongi are the same Nigerians and Ghanaians you will find in other parts of Asia....on tourist visas straight up hustling. You'll find them in Hong Kong (Wanchai), Bangkok and I've even been approached by them trying to sell drugs in Guangzhou!

- Chinese & Koreans have been in Japan for a long long time, but are always considered foreigners even 3+ generations. Japanese will never accept them as "Japanese".