Would I recommend retiring in Japan?

Someone asked me the other day whether I would recommend retiring in Japan. The person was from the Philippines, so they were already living in Asia, and wondering if Japan would be any better. My response to that depends on the type of life you are after, and your adaptability. Japan does have some very favourable advantages, though given the low cost of property in both countries, I see no reason why some of you could not consider a life in both countries for the reasons mentioned in other posts - such as the Japan Rail Pass, not to mention the cheap flights form the Philippines (Clark, Manila) to Japan (Osaka, Tokyo, Nagoya) - as little as Y4000 ($80) with Cebu Pacific in sale season. Read the Philippines Inquirer for details.

The benefits for retirees in Japan are:
1. Cash card - Its easy to draw on a foreign savings account from any Japan Post Office. All of them have access to the global Mastercard/Visa network (Cirrus-Maestro) now.
2. Safety - Japan is the fastest country in the world. Break-ins are not common, and it is a harmonious place, so little treat violence. Youngsters tend to be respectful of older people, so they also tend to be helpful.
3. Food: The food is very good. Its healthy; there is a lot of variety. It might not be the cheapest place to buy food, but older people eat less anyway, and tend to interact with people in the community. It would help to have a group of friends in your community, particularly to help with utility or getting a tradesperson.
4. Forums: There are very supportive forum communities in Japan where you can obtain really good advice from people in the same situation.
5. Culture: Living in Japan is a chance to experience another culture - a culture far different from any other. The place is unique. I tire of the shopping malls in the Philippines with their generic malls. Japan offers many fresh and interesting experiences.
6. Transport: You will unlikely require a car in Japan. A bicycle and bus is sufficient, though a car makes sense in rural areas. A scooter is a good idea too as Japanese people are very considerate of bipedal mode. The clear benefit is the Japan Rail Pass for non-residents. You can see a lot of Japan on these passes.

I don't see medical facilities as a big obstacle, though clearly before you settle somewhere you should ensure there is a local doctor who speaks English. It would also be helpful to have an English-speaking companion to translate your symptoms into Japanese. I suspect most doctors would know a lot of English because they attend conferences. This is particularly true for city doctors. I think you would only want emergency services if you are old or unhealthy. If you are relatively young, or need some delayed treatment, you can always fly to the Philippines for more expensive medical care. The services there are fantastic.

The obstacles are likely to be:
1. Language: Older people are less inclined to learn new languages, though if you have time, there is nothing stopping you trying. In any respect, Japanese people are surprisingly good at English...at least understanding it. In most cases, they just lack confidence in speaking. I never bothered to learn. I simply use sign language. Language is particularly a big problem setting up your home. When I first moved there is was a 6mth adjustment, and I did have issues with technical issues like routing emails through my cell phone. Foreigners are frowned upon by some telco technicians because we demand a higher level of service because we don't speak technical Japanese.
2. Cost of living: Japan is more expensive than a lot of countries. This is true for food, entertainment, eating out at up-market restaurants. Utilities are very expensive, but then so is the Philippines for many things, and the service is far poorer.

The ease of living in Japan also will depend on your adaptability and your ability to make friends who can help you with any obstacles. This is of course most difficult when you first arrive in Japan, to buy the property, and to finally settle there. After those challenges...all becomes routine. Living abroad is becoming for popular. Retiring abroad is also on the increase since people have decided that life is about experiences - not dying in some familiar place.
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Andrew Sheldon www.sheldonthinks.com
http://foreclosedjapan.sheldonthinks.com/

Cost of property in Japan

The cost of property in Japan - like anywhere else - varies considerably. Most people would be surprised by just how cheap property can be, as well as how expensive. The most expensive property is of course in the central Tokyo. It is typically those areas with expensive, exclusive homes, or otherwise those areas with exceptionally good subway connections or convenience to sought after districts like Roppongi, Shibuya, Shinjuku, etc. The cost of the most expensive properties is hardly worth mentioning. Any city property is a 'growth asset' so if you are able to find a place with a yield over 8% you are doing well. This is particularly the case in the cities because increasingly Japanese elderly people are retiring in city areas.

At the other end of the spectrum property in rural areas can be as cheap as $10K. Be careful to examine exactly the nature of the type of property. Are you leasing the land, or is it freehold title? I have been able to find some exceptionally cheap property in rural areas. I have even heard of people been given houses to remove the owners of the 'tax burden'. In depopulating Japan these properties are particularly attractive to foreign tourists who want to take regular holidays. What is the appeal? I can think of several benefits:
1. Low cost of property - under $30,00o for a decent place
2. Low government taxes - I pay just Y30,000 (US300) a year
3. Proximity to services - Japan is frowned upon for its population 'crowding' but thats only the east side of the country. The west is not so populated and has wonderful wilderness areas.
4. Japan Rail Pass - One of the reasons I know about Japan so much is because I have made great use of the Japan Rail Pass over the years. Very good value for foreigners (tourists only, not residents). Why would you want to reside in Japan? Just have extended holidays there.
5. Activities - Japan has a great array of activities.
6. Safety - Japan is without question the safest place to live, or to hold property. I don't even bother insuring my place. Mind you the place could burn down and the property would still be worth more than I paid. :) That is the benefit of buying foreclosed property.

If you are looking for a place in Japan, I'd recommend something close to Osaka, Tokyo or Nagoya so you have easy access to international flights. If you are looking for semi-rural property, something in the Mito area, or Saitama prefecture would be fine. If you are looking for something in more wilderness areas, I'd avoid the colder Western side of the country and find something in Wakayama prefecture, or Fukushima area. The colder NW is cheaper, but probably not a desirable place to live. As far as city living goes I like Tokyo for the 'plethora' of choice in facilities and its gaijin culture, and Fukuoka is great because of its relaxed, friendly style. Every time I go to Fukuoka I have a great night.
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Andrew Sheldon www.sheldonthinks.com
http://foreclosedjapan.sheldonthinks.com/

Type of foreclosed property to buy

Many buyers will be unsure what type of property to buy in Japan. I have several suggestions which will make you reflect more on your decision. The most important factors are:
1. Neighbours: Foreigners in Japan are subjected to discrimination in Japan. The nature of discrimination I don’t find terribly intrusive or threatening. Its more of a quiet detachment which makes them more scared of you. When you do something wrong you will probably never redeem yourself, and being in a strange country you will probably make an error. If you have a Japanese partner, then of course it makes a great deal of difference, particularly with the women. Since you are buying foreclosed property you want to avoid the possibility of angst from the previous owner. You therefore want to avoid properties with a legacy of family ties, like neighbouring brothers and sisters, etc. You are safe from a family legacy if you buy in a subdivision. You are not buying in non-urban land. A reader made a good point. Being in a rural area means you become the focus of attention. 
2. Charges: Charges on property in Japan are relatively low compared to other countries. Insurance costs are low, small lots mean that land taxes low, though there is also a tax on land improvements, so it is variable. Apartments or ‘mansions’ carry a very high charge to cover future improvements, as well as on-going maintenance. This charge is excessive and is justification for avoiding such strata-type property.
3. Depreciation: Japanese buildings depreciate significantly after 12 years as a result of the aging style and finish of the building. This ‘aging’ is because Japanese property is built for ‘function’ rather than lifestyle or aesthetic. For this reason I would caution against buying property which is going to deteriorate in value faster rate than your return on investment grows. The implication is that you want to buy a property with a high percentage of land value. This is likely to occur closer to the city centres. Mind you, modern buildings are better designed, so will likely keep their age better in future. The alternative is buying land with an old building on it and giving it a face-lift when required. If taking this approach I would tend to opt for one-story houses to avoid stress on the wooden frame and potential risks of poor design or workmanship.
4. Land area: Attempt to get as much land area as possible. Westerners are not accustomed to living on top of each other. If you are placed in the position of having neighbour problems, better to have some space between them and yourself.
5. Improvements: I would caution against buying property in rural areas which is outside a subdivision. There are several reasons:
             a. Short cuts: There is the possibility of short cuts being taken with respect to property approvals. i.e. Unlicensed water tank.
            b. Shared infrastructure: The old way of building was not regulated. For instance, if you buy a farm house, the septic or water might be connected through a neighbour’s property (i.e. a relative of the previous owner). The property was thus designed as part of a community. It is preferable to avoid this style of property if there is any uncertainty about the existence of such ‘shared’ infrastructure.
            c. Property boundaries: The property boundaries in the case of rural property are not so clearly established, so I would suggest avoiding rural property if the land area is small, or any improvements are close to the property boundary. There will not be any property disputes if you buy in a subdivision.
6. Geological risks: I would be inclined to avoid some of the subdivisions one finds perched on the sides of mountains on the fringes of cities. Japan is a geologically unstable area, so any building on or near step structures poses risks. The risk of land slide arises due to unstable slopes, but also because of rising hydrostatic head as water builds-up behind retaining walls. There are drainage holes to avoid this risk, but some structures are better designed than others.

For these reasons I consider properties in the 12-18yo age range as the best buys in semi-rural settings. Certainly I would be looking at the younger end of the market for rental properties, though ultimately it’s a question of how well the property has been maintained. One of the properties we purchased was 12yo old, however internally it looked brand new after we painted the wallpaper. The cost of building in Japan is very high so I would be looking at 'liveable' structures which can be renovated by recladding than building a completely new structure.

Refer to our Japan foreclosed property report for more details.

What is foreclosed property?

A foreclosed property is a property which is subject to forced seizure and sale by a lending institution because the borrower/homeowner has fallen into arrears on the interest repayment, triggering a debt recovery action. In Japan, debt recovery proceedings are undertaken by the Prefectural Court Offices.
Foreclosed property is a feature of many developed countries and some developing countries (like the Philippines) which have established formal proceedings for the liquidation and recovery of unpaid debts.
Insofar as the lender is concerned, the prospect of being foreclosed might not be a bad thing. Given that some property buyers bought their properties at excessively high prices, it might make more sense for some home owners to abandon the property rather than pay the debt. Why pay a debt if the property value is less than the outstanding loan amount? This is possible because property prices were falling at an average rate of 9% per annum until 2006, whilst any property over 12 years old will also experience a stronger rate of depreciation. For this reason, why hold onto such property. If the Japanese home buyer does not need a credit rating, they are better off abandoning the property and buying a new property in a relative’s name.
You can understand also that a lot of home owners will continuing making payments on home loans even though asset value < loan amount outstanding. The reason they will retain the loan is the fact that at the current low interest rates in Japan, it is likely to make more sense to make those payments rather than sell. The implication however is that Japanese banks are likely to face an anomalously high rate of defaults as interest rates rise. I would however suggest this dynamic is only likely to operate among the lower income Japanese households.

Signs of life in Japanese government policy

Already there are signs that the new Japanese government is looking at policies to stimulate economic activity. The Japanese government has bureaucrats around the world which look at public policy ideas in various countries. The new Japanese government appears to be taking several policy ideas from Australia (not necessarily the originator):
1. Immigration - The LDP could not sell the idea of increased immigration, though the current government is considering such a move.
2. Cash incentives for new parents - Australia had the $5000 baby bonus

The aging of the Japanese population and declining population thanks to a higher death rate than birth rate is the reason for the policy. This of course is good news for property buyers; particularly property buyers in the fringe areas of the major cities. We know immigrants prefer the larger cities (say over 2mil population) for several reasons:
1. Greater support from fellow country people
2. The availability of services for their culture, e.g. Local government info in multiple languages
3. Greater job potential
4. Less discrimination
5. Greater availability of accommodation
The outer areas become more popular because of the high cost of land in inner city areas. Many Asian immigrants will of course be accustomed to living in small apartments....but Japanese 'boxes'? One can expect property near outer satellite city stations to attract the greater share of interest.
This policy will of course take time to unfold. Japan is currently subdued like the rest of the globe, but expect other stimulus coming out of the recession. Recently the outer suburbs have experienced population losses as people were moving into apartments in the inner city. Its probable that foreigners would offset this trend to some extent in years to come.
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Andrew Sheldon www.sheldonthinks.com

Outlook for Japan

Most property buyers in Japan tend to be Japanese residents. For them the prospect of buying in Japan is less controversial. The reasoning goes: You need a house, foreclosed properties are a huge discount to market price, there is a huge inventory of foreclosed properties ensuring a good choice....where do I buy your book? :)
These people can also look abroad, but not knowing when they are going home, and the issues of looking for property abroad, and not wanting to put all their money in gold, is probably going to lead them to Japanese property. Fine.
That said, the Japanese economy is likely to perform well in future....after the slump that is. There are some promising aspects about Japan:
1. Reform-minded government can be expected
2. Household debt has wound back over the last 16 years
3. Low interest rates

When we look at Japan, one cannot ignore the relationship of Japan to its neighbouring countries. Aside from holding a lot of US treasuries (for what they are worth), Japanese enterprise has a lot of investment in Asia. The question of when and if Japan will allow increased foreign immigration is difficult to say. I tend to think it will target higher productivity and retraining rather than imported labour. We must remember that Japan is effectively outsourcing jobs already. There are Filipinos, Chinese, etc doing contract work for Japanese companies, both in Japan and outside. This is a global trend. So the question then becomes simply who will care and entertain the aging parents. Probably middle aged children and robotic pet dogs.
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Andrew Sheldon www.sheldonthinks.com
http://foreclosedjapan.sheldonthinks.com/

Recommended Property Markets in Asia-Pacific

There has been a bit more interest in our Japan Foreclosed and Philippines Property Reports of late. More interesting perhaps is the shift in the types of buyers. I detect greater interest from professional investors in Japan, as opposed to most buyers who are foreigners married to locals.

There is less interest in New Zealand, which is understandable given the recession, and the changes to the NZ immigration classifications, and all-round job losses. The strong $NZ is neither helping the economy, nor providing foreigners with the incentives to invest there. We are not complaining. We bought property there when the forex rate was 50-55 USD, now its 67c, so all is good. Property at the bottom-end of the market, where we bought is holding up well, and I expect inflation to keep it that way. On our side, there have been no more drive-by shootings, which has kept property prices higher. We are hoping that the thieves who took the water heater have not come back, as we are currently in the Philippines. The missing water heater no doubt drove a few customers away, and allowed us to get a real good price. Top that off with the fact that when we bought the outlook was particularly bad, and the 70's plus couple were probably looking at a repeat of the Great Depression, which they would have heard tirelessly about in their childhood.
I am also encouraged by the appointment of a right-wing politician Don Brash to a productivity inquiry. The government is keen to catch up with Australia.
In Japan we bought a property which is not in a "Urban Designated Zone" though given the level of housing construction in this valley in the mountains west of Tokyo, we are expecting a re-zoning in coming years, and a shift to town water/sewage supplies. We are comforted by the construction of high-value 'lifestyle' townhouses on the hill for Y30mil a piece. That should help our property purchases for just Y2.8mil. I provide more property buying strategies in our Japan Foreclosed book.

In the Philippines, we are also happy to report that our properties in Lipa City are looking good. Lipa is a growing city with a lot of promise. It is well located between Manila and Batangas. Great for foreigners who like to go to Puerto Gallera. It has the attraction of a cooler climate since its at an elevation of 400m, and there are areas which are even higher. It has three shopping malls, though I must say its still "franchise city". There have been some attempts to establish higher-end restaurants, but each has failed. I was particularly fond of the Korean restaurant. Fortunately there is now a new Savory franchise in SM Lipa which actually makes franchise food particularly tasty.
We are most pleased with our investment in Lipa. Both properties were foreclosed property purchases. One was in an upmarket subdivision. Not the typical place we would normally buy, but were were looking to buy something secure we could live in and store stuff whilst overseas. We got such a good price - P2700/m2, when they are selling them onsite for P4500/m2.
The prospects for the other property are even better. We understand that a private school developer is negotiating to buy a foreclosed lot on the highway near ours, so this should add to the value of this property, and step up the pace of local development. I have long believed this area would have a small shopping precinct, and I believe that the single entry/exit into Lipa City, which is congested now, will result in a diversion to take the pressure off the existing road.
The extension of the tollway is shown in red, my expected connectors are shown in green, and our hot spot is shown by the pink circle. There are a number of other attractive features. There is talk of the Fernando Air Base being used as a commercial freight facility. If this facility does indeed great converted into a commercial facility it will do a great deal for land values because the grounds of the Air Base are phenomenal. Nicest gardens around. This would make great facilities for high-end accommodation and/or restaurants. Its hard to envisage another shopping mall for another 10 years, but this also would be a good place for it. The Philippines population isa growing by 2% per annum, and given the rising industrialisation, more people are heading to commercial centres on the fringes of Manila. Manila is too congested. Filipinos care about their lifestyle more than anything else. Which is why call centres are being established in satellite cities like Lipa. The implication is that Lipa's incomes can be expected to grow quickly, as the population grows quickly. I don't even expect the recession to reduce remittances, nor do I expect much decline in call centre developments in the Philippines.

As I anticipated a year ago when I released the Philippines property report, the Philippines market is remaining one of the most prosperous places to invest. Given the Chinese-based heritage, I think you can expect a lot more Chinese investment in the nation as well. Japanese and Korean retirees will also feature. Where do you think these Korean and Chinese holidayers will retire as they age. Remember it is the old people with the money, the children want to live in the Philippines to learn English on the cheap, and to escape their discplinarian parents. The dynamics are on the wall. The Philippines will be the next tiger economy. Mind you the pickings are getting pretty slim. Pretty well every other economy has taken off. There are many other reasons why the Philippines is appealing. e.g. Its the only Asian country with generous visa conditions. You can stay in the Philippines for 18 months without leaving the country. That's just as a normal tourist, hence most people don't even bother with a retirement visa. For further information check out our 2-volume eBook set on Philippines property and receive a free list of Philippines bank foreclosed properties.

Andrew Sheldon
www.sheldonthinks.com
http://foreclosedjapan.sheldonthinks.com
http://nzproperty.sheldonthinks.com
http://philippinesrealestate.sheldonthinks.com

Regional growth in the Philippines

Here are further signs that the Philippines economy are retaining their strength as we predicted in our property report. The implications for Philippines property are significant. It must be appreciated that call centres are emerging as a significant employer of Filipino labour in the country, as call centres around the world close in favour of Philippine operations. Well not close, so much as downsize, as there are significant constraints teaching a Filipino to speak like an Aussie or NZ, or how to spell Auckland. General knowledge was never a strong point for any country in Asia. English is a strong point for the Philippines, so expect this trend to continue. The lack of general knowledge is a cultural divide which will closely be closed. In the meantime there is still a huge market for call centres in the Philippines.
Most call centres are being established in Metro Manila, but slowly they are shifting out into regional satellite cities as well as other cities around the country. More call centres will be built in regional cities as communications infrastructure improves. The attraction is the cheaper labour in these regional areas. The cost of living is lower and staff are more loyal since there tends not to be so many competing call centres to poach your staff. People are more relaxed and lifestyle orientated, but that is an obstacle as well, as much it might help to retain staff.
The impact of call centres is readily apparent. You can imagine the impact on a small city to suddenly have a few call centres in an area. Each of these students is living at home, earning $400 per month, and they want to eat out and drink with friends. Whereas I used to eat at empty restaurants in Lipa City, now they can be full of young people. There is a Starbucks coming to Lipa City.....about a year after a number of smaller coffee shops sprang up. Likely some of these businesses will fail and become upmarket bars instead. The growth of such services will make these places more attractive to business executives wanting to relocate out of Metro Manila. The Southern Highway from Manila is currently being upgraded. Eton City is planned in between, which will be just a 1hour commute from Lipa City. There are already a number of high class golf-residential resorts in the Lipa City area. There is already 3 shopping malls - SM, Robinsons and Fiesta. The place is overrun by franchises, but expect more boutique-style businesses in future.
This is just one of the locations progressing in the Philippines.
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Andrew Sheldon www.sheldonthinks.com
http://foreclosedjapan.sheldonthinks.com
http://nzproperty.sheldonthinks.com
http://philippinesrealestate.sheldonthinks.com

New political stage should underpin Japanese reform

The problem in Japan is that a large group of old men associated with the Liberal Democratic Party (LDP) have traditionally run the country. These men are often the descendants of former PMs. One need only reflect on the last 3 PMs of Japan – all of them were the descendants of previous leaders.
1. Shinzo Abe, the grandson of a former prime minister.
2. Yasuo Fukuda, the son of a former prime minister
3. Taro Aso, the grandson of a former prime minister.

Japanese people of course like to elect outspoken and ‘weird’ people whom they hope will break with the past. This has yet to occur. Yet on 30th August 2009 the Democratic Party of Japan (DPJ) ousted the 54-year reign of the LDP which has ruled Japan since its formation in 1955 (aside from a 11-month hiatus in 1993). Under Japan's constitution, the DPJ leader Yukio Hatoyama is assured to be the next Prime Minister of Japan. He will be formally appointed on 16th September 2009.

Many people will be hoping that new party leadership will mean change for Japan. That outcome seems improbable without good leadership. So what about Yukio Hatoyama - the leader of the DPJ? Well, he is unsurprisingly the grandson of a prime minister, who incidentally defeated Aso’s grandfather. Hatoyama might be considered a ‘pedigree politician’ with powerful family figures. His family is compared to the Kennedy’s in the USA. Hatoyama’s mother, Yasuko Hatoyama, is a daughter of Shojiro Ishibashi, the founder of Bridgestone Corporation. She was a big financial supporter when her sons established the Democratic Party of Japan (DPJ) in 1996.

Given their links to Japanese business it will be interesting to see whether ‘new’ money can out-manoeuvre the old zaibatsu conglomerates of the pre-WWII industrial era. Traditionally these corporations have had a strong influence on Japan, having a long association with the LDP. Another influential group is the civil service, though given their ‘safe’ positions, it seems probable that they will not disrupt reform if there is an agenda to do so, and that agenda has support.

The last time the DPJ had power was briefly in 1993. On that occasion, in the wake of the economic collapse, the fragile coalition of opposition parties were undermined and discredited by the LDP. That seems less likely on this occasion given the strength of the leader and the election result.

The DPJ's policies include plans to restructure the bureaucracy (expected to result in layoffs and pay-cuts); a monthly allowance for families with children, a reduction in petrol taxes; income support for farmers; free tuition for high school students; banning temporary work contracts in manufacturing; an increase in the minimum wage to Y1000; and no increase in the VAT sales tax until 2013.

The strength of the coalition seems assured for now since the other coalition parties won just 3 seats each compared to DPJ’s 221 seats. The People's New Party (PNP) comprises LDP members who opposed Koizumi’s autocratic style and post office privatisation, whilst the Social Democratic Party (SDP) is a socialist party which has witnessed a decline in support because of its support for North Korea. It can therefore be expected to be a weak party partner.

One might wonder whether the DPJ is the party to deliver economic prosperity to Japan given that it is considered the ‘Left of centre’ party in Japan. There is good reason to think that it will carry a reform agenda because the party was originally founded as a ‘centrist’ party. The move to the left prompted Yukio Hatoyama’s brother Kunio to leave the party. Yukio stayed with the party through several mergers with other opposition parties in 1998. He was DPJ Party Chairman and leader of the opposition (1999-2002), and DPJ Secretary-General before succeeding Ozawa as party leader on 16th May 2009. He was selected by fellow party members by a winning margin of 124 to 219 votes, defeating rival Katsuya Okada. Hatoyama has indicated that his wife Miyuki Hatoyama will play a prominent role as First Lady during his administration. This might suggest that he will attempt to gain broad-based people support as a means of driving political reform.

Katsuya Okada is another potential leader of the DPJ should Hatoyama fall from grace, as many Japanese leaders seem to do. He is the former president and current Secretary General of the DPJ, who will serve as Foreign Minister. He also has strong ties to business, being the second son of Takuya Okada, the founder of the Japanese retail giant AEON Group. He is a graduate of the University of Tokyo (law) and Harvard University. His political roots lie with the Takeshita faction LDP, though in 1993 he followed LDP faction leaders Tsutomu Hata and Ichirō Ozawa to join the Japan Renewal Party. Eventually they amalgamated with the DPJ and Minseito in 1998. He became president of the DPJ on 18th May 2004.
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Andrew Sheldon www.sheldonthinks.com

What happened to the Japanese property boom?

Where has the Japanese property market bull gone? This was the forecast 2 years ago by a Money Week writer. Well, markets are understandably hard to forecast. However the collapse in global financial markets was not hard to fathom given the legacy of fiscal and monetary stimulus over the last decade. The Japanese market was already in the midst of a recovery. It was merely curtailed by the current recession. The prospects for a property boom in Japan remain good, however the question is one of 'when' rather than 'if' I believe. There are a number of ducks which have to line up before we are likely to see a recovery in Japan's property market:
1. Reform-minded government able to deliver on productivity gains. This will likely take a charismatic leader since parliament is full of dead wood. The question of who is a plausible leader will be the subject of a later blog post.
2. Expansionist policy: Productivity gains will deliver the increases in real incomes which will stimulate spending and increases in property prices (as a demand response). In most cases governments are not satisfied with 'real income' gains, and are so inclined to artificially stimulate money supply through debt facilitation. Just as banks have been called upon for the last decade to curtail debt financing, in future they will be called upon to increase debt issuance.
3. Global recovery: A global recovery will result in a recovery in Japanese exports. Japan is well positioned to profit from exports to the USA, but also the Asian tigers and China.
4. Weaker Yen: Japan's national savings rate is gradually falling because of the legacy of decadence in wealthier Japanese youth, and also because of falling real incomes and reduced job opportunities. I am actually uncertain about whether the yen will depreciate. With interest rates so low, there is really only one way the Yen can go - UP! But relative yield is more important that absolute shifts, and loyal Japanese investors are reluctant to send savings abroad anyway. Low interest rates has the favourable benefit of discouraging Japan as a savings repository. Why hold yen given the low return on Japanese bonds? The only people silly enough to hold Yen are the Japanese savers - usually in the form of Japanese bonds. It is silly to hold bonds paying a 1% yield when you can buy foreclosed property in Japan and make 13% yield, and that is before you even consider debt financing for added leverage. If Japan can attract savings at 1%, clearly it does not need to rise much to attract savings. The reality however is that Japanese savers continue to be motivated by fear and nationalism rather than investment logic. The implication is that when foreign interest rates are increasing, Japan might not need to raise its rates as much. Afterall its intent has only been to subdue the currency. Is there a reason to change this policy? The time will come when the Japanese government does that. I think that policy is a decade off. What is worse - Japanese savers holding Japanese bonds yielding 1% or depreciating US bonds? I'd prefer to be a Chinaman saving an appreciating Yuan and a factory pumping out product. For this reason I am inclined to expect a weaker Yen for the next few years, though perhaps stability against the USD given its perturbed standing. I actually expect a rally in the USD in future because of rising interest rates. The US is down, but not out.
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Andrew Sheldon www.sheldonthinks.com

Big boost for NZ property market!

There are some important developments occurring in the OCEANIA region. It looks like Australia and NZ are moving inextricably closer together thanks to a desire by the PM's of these countries to boost economic activity. I guess they need to look busy during a recession, and no doubt they will welcome the opportunity to make some landmark decision during their 'reign'. Certainly the decision makes economic sense, particularly for NZ, but in absolute terms for both countries. I have written up a blog on the finer points, but importantly one can expect these developments to be a boost for NZ property prices. See my NZ blog.
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Andrew Sheldon www.sheldonthinks.com

Outlook for Japan could be promising

Reading the following article, you might want to consider the merits of buying property in Japan. Property markets in Japan have been overheated for some time. Japan in contrast is relatively undervalued. The question is how long will it remain in this condition. An election is due for March 2010. The question Japanese people will be asking after an annualised 15% contraction in the economy in the Mar-09 quarter, is whether they should continue their support for the Liberal Democratic Party (LDP). The LDP have enjoyed the support of the people for 5 decades - with the exception of a brief hiatus of 9 months. Most of this period corresponded to the Cold War alliance with the US.

With the Japanese economy locked in a 20 year slump, and the export slump in 2008, might the people consider a change? History suggests they are unlikely to change parties. However the long standing bear market suggests the problem is linked to the LDP and not to any particular administration.
The positives side is that the Japanese investors hold "$15 trillion in financial assets", mostly bonds and bank deposits, and "only 3.5% of it in the stockmarket". The positive is that Japanese investors have been sheltered from the economic collapse to a larger extent. The bad news is that they have had 20 years of poor returns, and their equity has shrunk significantly as a proportion of global assets, and more importantly, relative to the number of taxpayers, due to an aging population and zero population growth.
With the Japanese being the most patient slaves in the world to political mismanagement, you might ask how tolerant are they expected to be. The recovery will create a phenomenal investment opportunity because those bank deposits will find their way into the stockmarket. Clearly fund managers are waiting for a sign of political change. Unfortunately the shift in assets itself is likely to delay any shift since markets tend to over-expect prompting politicians to under-deliver.
Interestingly in the Mar-09 quarter, Japanese investors were net buyers of stocks for the first time since 1991. Already the Japanese trade surplus has collapsed. It is only a matter of time before the Japanese yen collapses as well for the following reasons:
1. The savers are not getting any younger - the percentage of retirees is increasing
2. Any recovery is likely to boost spending as well as exports. In the past only the export sector was strong. In the 'future' the domestic economy will need to be reformed, which will result in the broader based economic recovery we have not seen since the 1980s.

You might then wonder what are the implications for investors in Japan, with a falling yen on the horizon, and greater economic rigor. The problem of course is that this is a leap of faith. Japan may not recover for some time. Generally it takes an economic emergency to drive reform. In the case of Japan it might take a charismatic leader who can unit LDP party factions. There is little sign of a voter defection. Instead we are seeing a defection by LDP members into external groups. Surely this will lead to some less entrenched factional outcomes. Herein lies the potential for surprise.

A collapse in the currency is of course not good for investors, though I would expect such a collapse to be quick because broad based consumption and foreign investment (China, etc) will be more important than export surpluses. Clearly the country will need to address its lack of population growth, and such a change could be an important element of reform and recovery, and clearly good for the property market. I would however expect an increase in property taxes since the huge debt needs to be funded. The other question remains the outlook for interest rates. They will most certainly increase, but will they match the foreign increases as we look forward towards higher inflation.

Clearly Japanese stocks make a lot of sense as well. A weaker yen will provide greater stimulus to exporters. These exporters will benefit from retained earnings from offshore assets, as well as greater profitability from retained Japanese plant. Some Japanese stocks also offer excellent exposure to China.

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Andrew Sheldon www.sheldonthinks.com

The attraction of buying Philippines property

We encourage people to buy property over the next few years in the Philippines. There are a number of reasons for this we have described in our eBook, both market related and also regulatory. There is the 2% population growth that few countries can match. There is the even higher rates of growth in satellite cities as people migrate to get jobs. There is the changes to the regulation of land use, which make it harder for people to develop land, and developers to build condos. These factors are just some of the factors which are going to increase property demand and reduce supply. These ideas and many others we explore in our eBook on "Buying Philippines Property". The Philippines is the only property market which has yet to experience a property boom. Its on the doorstep to China, its regional airports are already receiving direct flights from China, and the Philippines is already a Chinese-affiliated country.
The Dept of Tourism in recent years has also upgrades national tourist infrastructure. All the trends are good.....its just a matter of time. The Philippines offers more generous visa conditions than any other country. You can stay on a tourist visa in the Philippines for 18 months before you are obliged to leave. Hardly an obstacle since flights to Japan, China, Singapore and other places are only $US100+taxes, and most people have reasons for a change. The country is of-course English-speaking. Buy the report now!
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Andrew Sheldon www.sheldonthinks.com

Buying property in Mountain Province, Philippines

Last week I visited Baguio in Benguet and Sagada in Mountain Province, in the central Luzon, the Philippines. From a property standpoint there are several observations to draw from this trip.
1. Baguio is congested and has little appeal as a place to buy property. There are some good facilities in this town because of the historic US presence, and the town has a wonderful cool climate and the healthiest and broadest choice of vegetables in the country. Compared to the crappy vegetables you buy from SM or Robinsons in Manila, these are far better and MUCH cheaper. Baguio's markets are also very good for buying things. I bought a second-hand backback for Y300 and a new pair of black shoes for a wedding for just Y400 ($US8).
We drove on to Buguias (still in Benguet Province). This town of 40,000 people struck me as a great place to buy property if you are interested in a relaxed, rural life. There are several appealing aspects:
1. Foreclosed properties are available from the Rural Bank of Buguias
2. The region is scenic
3. You are fairly close to Baguio, though its a torchuous windy road, so you might die before you get to hospital treatment
4. There is a very cheap and bountiful market for fruit & vegetables in the town market
5. Good transport services like everywhere else in the Philippines
6. Cool climate - makes it a pleasure to live there
7. High rainfall - its always green, and if you are interested in generating hydro electricity from a small microhydro scheme, then I can think of few better places because this area receives high rainfall almost year round. I would not be surprised to find out if the load factor on the plants here are over 60-70%, when 50% is considered good. A local lady tells me a local waterfall only stops flowing for one month in the dry season, however I'm not sure how reliable that information is. If I was a balikbayan interested in helping the local community, I'd be building micro-hydro schemes for $2000-5000. Why?
1. The Philippines power is amongst the most expensive in the world - still some capacity is oil-fired
2. The high load factors
3. The free energy after construction
4. Improvement in self-reliance and grid stability
5. The ability to increase disposable income for Filipinos by giving them free electricity, as opposed to paying for them to go out to some takeaway.

Unfortunately I doubt may Filipinos in the Mountain Provinces have relatives abroad...so it all comes down to philanthropy. Anyway, for the right person, I thought this was a great area. I personally liked the town of Sabangan more. It was more scenic, and I love the kayaking, though it is very isolated. Sagada has a lot of foreigners living there. I'm not sure of the attraction. It is a tourist area, its cool, but not much else there, and its more isolated.

The other appealing aspect of this area is the fact that the roads are constantly improving. The main Baguio-Bontoc road is currently being concreted, though after completion it will still remain a VERY windy road, so it will only attract the most dedicated tourists from Manila. The Dept of Tourism is upgrading facilities. The only shopping malls for a while will remain in Baguio. Unlikely to see one in Buguias for another30 years...unless you don't mind the commute, though I would not mind it if I never saw another franchise city. Expect a Jollibee in Sabangan within 10 years. I do believe this area will open up. It does have tourist potential, and the govt is getting their act together.
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Andrew Sheldon www.sheldonthinks.com

The best property markets in the Asia-Pacific

There has been a bit more interest in our Japan Foreclosed and Philippines Property Reports of late. More interesting perhaps is the shift in the types of buyers. I detect greater interest from professional investors in Japan, as opposed to most buyers who are foreigners married to locals.

There is less interest in New Zealand, which is understandable given the recession, and the changes to the NZ immigration classifications, and all-round job losses. The strong $NZ is neither helping the economy, nor providing foreigners with the incentives to invest there. We are not complaining. We bought property there when the forex rate was 50-55 USD, now its 67c, so all is good. Property at the bottom-end of the market, where we bought is holding up well, and I expect inflation to keep it that way. On our side, there have been no more drive-by shootings, which has kept property prices higher. We are hoping that the thieves who took the water heater have not come back, as we are currently in the Philippines. The missing water heater no doubt drove a few customers away, and allowed us to get a real good price. Top that off with the fact that when we bought the outlook was particularly bad, and the 70's plus couple were probably looking at a repeat of the Great Depression, which they would have heard tirelessly about in their childhood.
I am also encouraged by the appointment of a right-wing politician Don Brash to a productivity inquiry. The government is keen to catch up with Australia.
In Japan we bought a property which is not in a "Urban Designated Zone" though given the level of housing construction in this valley in the mountains west of Tokyo, we are expecting a re-zoning in coming years, and a shift to town water/sewage supplies. We are comforted by the construction of high-value 'lifestyle' townhouses on the hill for Y30mil a piece. That should help our property purchases for just Y2.8mil. I provide more property buying strategies in our Japan Foreclosed book.
In the Philippines, we are also happy to report that our properties in Lipa City are looking good. Lipa is a growing city with a lot of promise. It is well located between Manila and Batangas. Great for foreigners who like to go to Puerto Gallera. It has the attraction of a cooler climate since its at an elevation of 400m, and there are areas which are even higher. It has three shopping malls, though I must say its still "franchise city". There have been some attempts to establish higher-end restaurants, but each has failed. I was particularly fond of the Korean restaurant. Fortunately there is now a new Savory franchise in SM Lipa which actually makes franchise food particularly tasty.
We are most pleased with our investment in Lipa. Both properties were foreclosed property purchases. One was in an upmarket subdivision. Not the typical place we would normally buy, but were were looking to buy something secure we could live in and store stuff whilst overseas. We got such a good price - P2700/m2, when they are selling them onsite for P4500/m2.
The prospects for the other property are even better. We understand that a private school developer is negotiating to buy a foreclosed lot on the highway near ours, so this should add to the value of this property, and step up the pace of local development. I have long believed this area would have a small shopping precinct, and I believe that the single entry/exit into Lipa City, which is congested now, will result in a diversion to take the pressure off the existing road.
The extension of the tollway is shown in red, my expected connectors are shown in green, and our hot spot is shown by the pink circle. There are a number of other attractive features. There is talk of the Fernando Air Base being used as a commercial freight facility. If this facility does indeed great converted into a commercial facility it will do a great deal for land values because the grounds of the Air Base are phenomenal. Nicest gardens around. This would make great facilities for high-end accommodation and/or restaurants. Its hard to envisage another shopping mall for another 10 years, but this also would be a good place for it. The Philippines population isa growing by 2% per annum, and given the rising industrialisation, more people are heading to commercial centres on the fringes of Manila. Manila is too congested. Filipinos care about their lifestyle more than anything else. Which is why call centres are being established in satellite cities like Lipa. The implication is that Lipa's incomes can be expected to grow quickly, as the population grows quickly. I don't even expect the recession to reduce remittances, nor do I expect much decline in call centre developments in the Philippines.
As I anticipated a year ago when I released the Philippines property report, the Philippines market is remaining one of the most prosperous places to invest. Given the Chinese-based heritage, I think you can expect a lot more Chinese investment in the nation as well. Japanese and Korean retirees will also feature. Where do you think these Korean and Chinese holidayers will retire as they age. Remember it is the old people with the money, the children want to live in the Philippines to learn English on the cheap, and to escape their discplinarian parents. The dynamics are on the wall. The Philippines will be the next tiger economy. Mind you the pickings are getting pretty slim. Pretty well every other economy has taken off. There are many other reasons why the Philippines is appealing. e.g. Its the only Asian country with generous visa conditions. You can stay in the Philippines for 18 months without leaving the country. That's just as a normal tourist, hence most people don't even bother with a retirement visa. For further information check out our 2-volume eBook set on Philippines property and receive a free list of Philippines bank foreclosed properties.
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Andrew Sheldon www.sheldonthinks.com

NZ property market outlook

Here is a good blog post if you are interested in the NZ property market - and questions of when to buy. See blog.
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Andrew Sheldon www.sheldonthinks.com

Help update our Philippine foreclosed property listings

There are some 750 rural banks in the Philippines which offer foreclosed properties for sale. The problem is most of these banks have few resources because their customers have little money as well. Some rural banks have a single branch with just one computer. It is impossible for us to contact all these banks in the hope of getting a listing of their properties for a number of reasons. We would therefore encourage readers who have relationships in local communities to email us lists of properties. We will update our foreclosed listings from the banks. We do this whilst travelling around the Philippines on holidays.

For more information on our Philippines property report - see our adverts on this page.

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Andrew Sheldon www.sheldonthinks.com

The fastest growing cities in Japan

The latest population statistics for Japanese cities shows that the fastest growing cities are:

1. Kawasaki City 1.4%/year

2. Saitama City 0.8%/year

3. Fukuoka City 0.75%/year

These growth rates don't look so impressive, but you need to consider that internal migration in each city adds an extra dynamic resulting in faster growth in some areas, and lower growth in others. For this reason these city-wide statistics are of little benefit if you are seeking to buy property. For instance Tokyo-23 grew at 0.65%, however migration from some areas of Tokyo to others will polarise the average figures.

For this reason we look at the statistics for each village, town and city within the Tokyo and Saitama prefectures. Of course similar analysis can be performed on other prefectures too. If you are interested in population statistics for Saitama or Tokyo, refer to our Population Charts for Tokyo and Saitama precincts. It will give you clues on where to buy property.

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Andrew Sheldon www.sheldonthinks.com

Cheapest condo in Philippines

The cheapest condo in the Philippines is likely to be some failed apartment complex which is half-complete. I found one exactly like that in a prime position on the freeway into Manila from the South. It had turned into a ghetto. Its an amazing thing about the Philippines is that people can have the dodgiest of homes, but they will have the latest car - a Honda Civic or something, rather than the 10 year old Japanese corolla import they can really afford. Financial literacy is not a local skill - at least not the lesson I learned about money. They of course learned that if you want to get somewhere then you need to present to impress; as that is the way you climb the social ladder. Personally, they are not the type of people I would like to live next door to because they would see me as the next rung on the ladder.
The best condos I found in the Philippines that I came across were those built by DMCI. This is an engineering company, and it shows in the quality of their workmanship. You can tell the company is run by an engineer however because we found their customer service to be shocking. They did however repay our deposit...though they took a long time. We particularly liked the design of Riverfront Estates and Raya Gardens in the south of the city. They might not be the best location but they are pretty good, and they are very cheap.
You will pay just P2.3-2.5 million for these 2 bedroom condos, though prices have likely increased since I last looked.
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Andrew Sheldon www.sheldonthinks.com

Cheapest property in Tokyo, Japan

The cheapest property in Tokyo is going to be a certain type of property, with certain types of characteristics, so its important to be weary. Risk is managed, not avoided. The difference between the people taking action and those who don't is information. My ex-GF was a licensed real estate agent in Japan, so we developed a strategy for buying property, and bought two properties together and looked at many others, and bid on 4 in total. Our focus was Tokyo, but we also looked at Shizuoka closely, and other areas like the ski areas.

So where might you expect to find the cheapest property in Japan. Well its likely to display the following characteristics:
1. A very old house that no one wants to live in - say over 50 years old
2. A very small land lot, maybe oddly shaped
3. A house with actually no land title - a leasehold - so you will end up paying rent - and face the possibility of eviction
4. Remote from transport, services, infrastructure
5. No road access - hard to believe its possible
6. Damaged property in some sense - so cheaper to demolish and start afresh
7. A property perched on the side of a slope with engineering/safety issues

This is the bottom of the market, and there are plenty of properties around like this that no one will touch. In fact its probable that you will not like them either, but they are there, and that is where the bottom is, so from that basis you can start looking up. So what will you pay for such a place? Well I don't know but I'm guessing a few thousand dollars only because its such a bad proposition. I have seen a property in Shizuoka at the end of a railway line, 2km from town, old 40yo house, crowded in among other houses, but otherwise a very scenic area, and in an area prized for its onsens. This property was offered for Y800,000 when I looked (say $US9,000). It was remote from a large city - say 4 hours from Tokyo - 2 hours fast, 2 hours slow train. I would pay $60,000 to get 6 hours from Sydney for the same thing. Way way outback!
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Andrew Sheldon www.sheldonthinks.com

Cheapest house and lot in Philippine

House and lots are generally not cheap in the Philippines because such property is generally provided with services connected, which are expensive. I say generally because there are exceptions - and they are often failed estates which were not property approved by the government regulator. We looked at one such estate and you could buy the land for just P200/m2. Some of the properties already had houses on them. We saw a very nice looking house for P1 million. This estate was close to a large city (300,000 people) and a lake. The problem was the estate was abandoned, so there was no maintenance, security or telephone services. Everything else was however already developed - including a function room, swimming pools and sealed roads.

More commonly you can buy land in subdivisions for as little as P2000/m2, with more exclusive subdivisions in rural areas over P5000/m2, and over P10,000/m2 as you approach the cities. There are some very attractive estates around with fabulous golf courses, club houses. The problem with some of these estates is that they lack any atmosphere. They may as well be abandoned because none of the property owners live there. In fact people are buying these properties and sitting on the vacant land for decades until they retire. They make the worst type of investment.
House and lots or developing a lot does make sense if you are a foreigner or wealthy Filipino looking to protect yourself or your possessions. Anything not tied down gets stolen so security is an issue. That is why people move to the gated subdivisions. They are not all the same, so I would recommend our report.
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Andrew Sheldon www.sheldonthinks.com

Cheapest property in the Philippines

The cheapest property in the Philippines is unsurprisingly unimproved property in rural areas. Its usually land not subject to pasture improvement isolated from the major commercial areas, and often there is no road access. It might even be perched on the side of a hill side or a volcano. We looked at a block of land with great views over Lake Taal. The property was perched on the edge of he crater - world class views if the slope holds up in the next volcanic eruption. :) You could purchase it for P20/m2. There was other land for P10/m2 which was inside the crater, 500m down a steep set of stairs, and sloping at 70-95%. Yes, I believe the land was overturned in parts.
Would you want to live there? I don't think so, but I though you might want to know just how cheap property can get. In fact you will find cheaper, say in places like Quezon. Areas which are either not cleared or remote.
Agricultural land is far cheaper usually than commercial or residential land because it does not have services or connections. But you need to know about the rules governing such land. What is a report for but to convey such information.
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Andrew Sheldon www.sheldonthinks.com

Tax benefits for foreign investors in NZ

In 2006 the NZ government made changes to the New Zealand’s income tax code which make immigrating or resettling in NZ particularly attractive for foreigners. New residents will be able to have an exemption on all foreign earnings for four years. This does not strike me as a particularly sensible law because the recession will last 4 years, so people might be prone to just leave the country in 4 years. But hell - who doesn't love a tax break!

New immigrants to New Zealand qualify for the automatic tax exemption on their individual overseas income under the Taxation Act 2006. The tax exemption is targeted to encourage prospective migrants to consider New Zealand as a viable and competitive place to live and work. The exemption also applies to returning New Zealanders who have not been resident for tax purposes for at least 10 years before their arrival.

It operates to exempt all “transitional residents” from New Zealand tax on their foreign-sourced income by treating it as being derived by a non-resident. A person will be deemed a transitional resident if on or after April 1, 2006:
1. They have a permanent abode in New Zealand, and
2. Immediately before acquiring that permanent abode, they were continuously non-resident for at least 10 years, and
3. They have not previously been a transitional resident.

It is possible for a person who has visited New Zealand before acquiring a permanent abode – for example, to attend interviews or to look for housing – and who would otherwise be deemed resident in New Zealand (because they had been in the country for more than a total of 183 days in any 12-month period) to benefit from the exemption.

The transitional resident status will last for four years, ending on the last day of the 48th month after the month in which the person acquired a permanent abode in New Zealand; or the day the person ceases to reside in New Zealand. After expiry of this period, the person is treated as a resident, and their foreign-sourced income becomes liable to income tax in New Zealand.

The only types of foreign income not tax exempt in New Zealand are those derived from overseas employment performed while receiving the exemption, and business income relating to services performed offshore. All other foreign-sourced amounts (including interest, dividends, and employment and bonus income from previous employment) derived by the transitional resident are exempt.

The new legislation also provides that, where a settlor of a foreign trust becomes a transitional resident in New Zealand, they or any beneficiary or trustee of the trust will now have up to five years to elect for the foreign trust to become a qualifying trust. A foreign trust means that no settlor is resident in New Zealand from when the trust is settled until a distribution is made. A foreign trust is not required to pay New Zealand tax on its foreign-sourced income. If the election is not made, the foreign trust becomes a non-qualifying trust, with distributions of accumulated income or capital derived taxed at a penal rate of 45 percent. Previously, if a settlor of a foreign trust became resident in New Zealand, any of the settlor, trustee or beneficiary had only one year to elect to convert the foreign trust into a qualifying trust.

This tax concession makes 'sleepy NZ' a great place to hang out for the next 4 years of the recession. For more information refer to our property report.

Australian Currency update for foreclosed property

A reader recentlyasked me some questions on the foreclosed property market in Japan.
I want to ask questions – but first I want people to buy the book. There are several reasons:
1. I invested 3-4 months into each book, so it would be nice to get some reward/return for my efforts
2. People have a habit of asking questions which are answered in the book – if only they bought it and read it before asking me.

This particular reader did however ask a question which I would like to offer an update. He is an Australian, so it relates to the strength of the $A against the Yen.

I would suggest that my forecast in the book remains basically the same, though there is one factor which will have an impact since I revised the book (2nd edition) in November 2008. That issue is the recent decision by the Chinese government to buy and stockpile commodities. Relatively stronger commodity prices, plus capital developments like LNG terminals (Gladstone & Far North) will likely result in stronger than otherwise capital inflows into Australia. I discussed this in my forex blog, however the decision by the Chinese government to buy and stockpile commodities is new, and unprecedented for the Chinese.
Understand that the Japanese government actually stockpiles strategic commodities for emergency provisions, but in the case of the Chinese, they are doing it because they fear an erosion of the USD which they were inclined to hold by way of US treasuries before. I did expect them to buy gold, but in hindsight, commodities makes more sense. The implication is that commodity price cycle will be shallower and longer. By implication we can expect the AUD currency against the USD to be stronger than otherwise, but the trough to be wider; though of course that depends on how China manages the commodities inventory. The implications for the AUD-JPY are basically the same, as the AUD is closely linked to global economic growth.
You might ask – will other governments follow the Chinese action and buy commodities? I could envisage some countries following suit, e.g. Vietnam, but not so many because of the costs associated with doing it. It’s cheaper to hold treasuries for most countries. China is different because it probably has a lot of spare warehousing, not to mention cheap land in rural areas. I would expect some govt officials to pilfer some of these reserves. Great recipe for corruption.

Japan remains a great place to buy foreclosed property. Some readers are buying inner city properties. I personally would wait a little longer before buying in central city areas. It makes more sense to buy in rural or suburban areas since these areas never had the price rises experienced in the city. Some of you wouldn't lower yourself to live outside Tokyo-23, in which case it makes more sense to buy an investment property in outer areas, and rent it or live in it another 6-12 months. The Japanese economy is contracting faster than most, so incomes are going to fall. In the city asset prices will as well. Some of you are excited...I know the feeling. But good judgement demands buying when things are worst. People are not feeling any pain yet, in part because of the lagging effects, and in part because of the central bank stimulus. The lower interest rates will mean nothing for years. That is because in the short term banks won't be lending, and in the long term because there will be inflation keeping interest rates higher.
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Andrew Sheldon www.sheldonthinks.com

Treading where others fear - risks with foreclosed property

This is my response to a forum post I found on foreclosed property. The argument is basically...if foreclosed property is so good, why isn't everyone doing it.

[QUOTE=Base]The keibaiyasan (foreclosure "helpers") charge high because auctioned places are full of properties with easements and other problems. You can get burned easily if you don't know what you're doing, which is why regular Japanese don't participate.[/QUOTE]

Problems, problems, problems. Risks are not avoided, they are managed. There is so much 'scary risk' priced into foreclosed property in Japan, only an absolute idiot would lose money. Now, when I think of risk management, I don't consider the Japanese to be among the most prudent in the world. Why? They are risk evaders rather than risk managers. Of course we can all huddle in our parents home until they die, or we can step out in the real world and build/buy our own home. Its hard to finance a property anywhere in the world. Japan offers the promise of buying a very cheap place for cash, and you can actually profit just on the purchase.

This guy talks about the risk of the property having easements. If you think about the actual risk involved, quantify/qualify it, it really is a small risk, and easily managed. For instance:
1. I would not expect new subdivisions to have land boundary problems because they are surveyed from fresh development title. Old farms in rural areas could have problems like these because they have multiple houses owned by family, then family members sell to strangers.
2. I would only expect easements to be a problem if you are building a new place. If you are happy with the existing home, again, so problem exists. If you intend to demolish and rebuild (which you shouldn't do), then you build within the context of the constraints.

You will come across farm houses which will have unlicensed buildings, underwater water storage banks, septic systems, etc. Do you need to fear? Japan has only been a highly organised society for the last 30 years. Before that it was the 'Wild West', people doing as they pleased. This is the culture in the rural areas. Now Japan has cities because its no longer an agrarian society. Do you think the local govt is going to come in and ask you to change something done 30 years ago. Particularly after the court documents (i.e. the govt) did not say it was there. The answer is no because there are many such instances of illegality in the old days.

Foreclosed properties are one of the best kept secrets in Japan, and thinking people are engaging in the market. Japan is full of 'safe' people, but given the number of people, the country still manages to pack a city office on bidding day. But it has many more foreclosed houses , so its quite an opportunity. You don't have to pay thousands for a broker to guide you through the process, you choose to. There is a book on this website for those who tread where others fear. Japan is not the only oppportunity, but its a hell of a nice place to live, and it is the cheapest. I couldn't find a cheaper place in the Philippines at the same standards of housing. And far better facilities.

PS: Risk is managed, not avoided. One persons perception of risk is another man's opportunity.
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Andrew Sheldon www.sheldonthinks.com