REthink Tokyo sat down with Shirley Yan to gather some insights into her property journey and experiences in the Japan real estate market. 

How do you best help a buyer or investor? and how does this change if they are a foreigner?

Japanese investors know the basics of the market very well, however with foreign buyers, there is a lot of education required about how to get things done here versus their home country. The actual brokerage process is different in Japan than in other countries, the property is treated differently on a tax basis.

Japanese investors have access to information that allows them to better understand the market mechanisms, yet they do not know the details of what licensed brokers learn when they become certified.

So, from my perspective, we only require to explain to Japanese buyers the items they don’t understand in detail. On the other hand, we usually need to educate foreign buyers in great detail prior to moving on any particular property.

Another difference is Japanese buyers have more granular knowledge about up and coming areas of the city whereas foreign buyers tend to only focus on the famous areas of the city.

How do you best help a vendor selling their property?

Japanese sellers usually don’t think about the market timing when they decide to sell as the local culture is not as concerned with market fluctuations like foreign sellers are. A lot of reasons Japanese choose to sell property are due to items including work transfer or school transfer, kids leaving the nest and the parents who wish to downsize etc… so therefore a Japanese seller is not as concerned about profit as much as a foreign seller is.

As such, foreign sellers are much more concerned about market timing which is where we excel at. If you understand Japanese then you are able to digest granular information about the market but if you can’t then you need to rely on a firm like ours to give you the data to price your property at a level that will trade.

Where are the emerging markets that people should be looking to in Tokyo/Japan that you think will have upside?

The Toranomon area of Tokyo. This is entirely due to the Mori Building redevelopment of the area. Anything Mori Building doesn’t yet own is a great buy now because the entire Toranomon area will be gentrified, meaning demand will rise and thus so will prices.

Other strong areas are Shibuya, Shinagawa, Shinjuku and the Bay Area within Chuo Ward. These redevelopment areas are driven by the Tokyo Government, not only for the Olympics but after also. Infrastructure is being upgraded and more and more residential inventory is being built providing affordable condos for families to live with easy access to the rest of the city.

What advice would you have for those looking to come into markets like Tokyo/Japan and set up a real estate business?

The benefits of incorporating to purchase property is a flat tax rate and incorporation is the only way an offshore buyer can access domestic financing. To access the financing, you need to get through at least two fiscal cycles in the black before being able to qualify to apply for a bank loan.

The demerits are that the added cost of incorporating in the form of office space and a necessary Japanese president who must draw a salary usually eliminates incorporation as an option for portfolio sizes less than US$10 million roughly. It is not advisable to buy a small 1 bedroom after incorporating as the running costs of the corporation would push the yield into negative territory rather than just owning as an individual.

Alternatively, if you are purchasing as a corporation not based in Japan, you wouldn’t be able to qualify for financing but you would pay around 10% less in taxes on this end than you would if you started an onshore Japanese company.

What would you like to see changed in the real estate industry in Japan over the next 5 years?

Me being Chinese, I would like to see a Property Investor Visa be introduced. Currently this is not seen in Japan and the government could learn the lessons from Vancouver and Sydney as to how the Japanese wish to go about it; for example setting a higher entry price to qualify for the visa so as not to artificially increase local pricing.

Another thing is in a perfect world, I would like to see Japanese banks offer non-residents yen loans but in reality that most likely will never happen.

Who are currently buying in Tokyo/Japan at the moment? where is demand coming from, where is the buyer interest at the moment? 

In 2013 and 2014 we noticed a lot of yield investors but now we see more primary and second home purchases as well as capital appreciation speculators. Prices have risen over the last 5 years and rents, while on the upward trend, are not rising as fast as prices have so yields have gotten slimmer.

For more information about the Tokyo property market email Shirley Yan Senior Vice President of the Sales Division for Housing Japan via the contact details below.

See also:

Get to know Toshihiko Yamamoto, Founder and CEO of Yamamoto Property Advisory

Get to know Yukiko Takano, Manager for International Services List Sotheby's International Realty

Get to know Takashi Nakazawa of Japan Valuers