The price level of flats in Japan has skyrocketed since 2012, and it is expected that market prices will top throughout the 2020 Tokyo Olympic Games. In this specific article, we give an overview of the primary factors that affect the appraised value of investment properties in Japan. We hope this information will be beneficial to people taking into consideration the purchase of the investment property in Japan but also current owners considering selling.
Scroll to the bottom of the article if you are a current house owner (entire buildings, single unit, house, commercial, or other) and would like to receive a free, no obligation property appraisal from PROPERTY Japan. The graph below shows the price forecast for recently constructed apartments by the Japan Real Estate Institute. Price forecast for newly constructed apartments in the Tokyo 23 Wards. Chart created based on data released by the Japan Real Estate Institute.
Now, many people in Japan are concerned regarding a property “price crash” and are considering the quick sale of their house. However, it is never true that the same market conditions connect with real estate across the entire country. With regards to the property, those who continue steadily to hold onto their house may find it shall lead favorably to future asset development.
Also, with respect to the condition of your unique property, its value may rise, or whether the overall market goes up or falls regardless. Percentage of total purchase amount of real estate purchased by foreigners in Japan. When you are considering selling, it’s important to solidly grasp market conditions and consider who can buy your property.
The above graph is based on data from the Nihon Keizai Shimbun (January 6, 2018). It shows the purchase amount of real estate in Japan and the percentage purchased by foreigners. Looking as of this, the percentage of Japanese real estate purchased by foreigners is on an increasing annual trend, and in 2017 about 24% of Japanese real estate was purchased by foreigners.
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This figure is expected to rise in the foreseeable future. When considering selling, it’s important to recognize these market conditions and future market developments. It is also important to consider the average person conditions of the properties or property you possess, as defined below. The appraisal method for residential and investment properties differs.
The conversation below pertains to investment properties. For investment properties, it is common to calculate the purchase price by dividing the net revenue of the property by its assumed yield. As a computation method, the worthiness of the house is searched for by rebating the income for one year based on an acceptable return yield that could be obtained from the house. For example, imagine you purchase an apartment for 10 million yen and lease it out for regular rent of 100,000 yen. In this full case, since the profit produced in one year is 1,200,000 yen (100,000 in a year), the produce will be 12%. This produce is called world-wide web yield. However, world wide web yield is no indicator of revenue.
It is essential to deduct costs from annual rent income. For local rental management, various expenditures such as property taxes, administrative expenses, repair money to be paid to the management company, open fire insurance fees, and mortgage interest are considered costs. So, the actual profit (net income) is calculated by deducting these expenses. It’s quite common to obtain yields used for evaluation by referencing yields for similar properties in the surrounding area. In conclusion, determining the yield is the most important point in appraising the worthiness of investment properties. When evaluating the value of the investment property, it is important to know if the apartment is completely occupied or almost fully occupied.
