Chinese interest in Tokyo/Japan property

Today's Japan Times documents increasing interest in Japanese property buy Mainland and Taiwanese Chinese buyers. The Chinese property market is fully-valued at the moment, so it is unsurprising that they should show interest. Interestingly, there is little sign that Chinese buyers are very discerning in their acquisitions, as most are inclined to buy high-priced Azubu apartments or ski resort accommodation in Hokkaido.

Many of the investors are buying for diversification, some so their students can study in Japan, and others for business or lifestyle purposes. Irrespective of their motives, clearly there is a growing demand for foreign property from Chinese buyers, and countries like Japan, the USA and the Philippines will feature highly. I would however draw their attention to foreclosed property, which trades at a significant discount to the private property market.

See the Japan Times article here.

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Is it a good time to buy property in Japan?

Another writer, Chris Dillon, Dillon Communications, has advanced the value of investing in foreclosed property in Japan, so I wanted to assess some of his logic for recommending such an investment. Firstly, buying property in Japan for me is not simply about making money, as I am sure some of you are not out primarily to make money. Japan is a nice place to live or stay, so you would like a 'base station' in order to partake in some foreign experiences, whether its bars, bird watching or touring around, or simply retiring.

I agree with him that if you are looking for capital growth its hard not to look outside the cities. I think there are certain areas outside which appeal for lifestyle reasons, i.e. Holiday houses in the west of Tokyo and Saitama, which make excellent weekend 'get-a-ways'.

He likes old apartments because they offer great yields. I would be inclined to steer away from such old places because you are paying out too much in property management fees, over which you have no control. Why buy an apartment on good yields when you can buy a house on good yields, and pay only low taxes.

In a sense I agree with him about the bad news about Japan. All the bad news has effectively been priced into the market. What else can go wrong? Well, on the basis of his argument, I would have to say the currency. He says the 'yen's strength is not a major issue'. Indeed, because it is not strong, so much as "relatively strong" against other very weak major currencies, namely the Euro and USD. They are hardly a good standard if you are looking at currency diversification. If you were looking at strong or 'hard' currencies, you would be looking at the AUD. Incidentally, Australia has recorded the strongest property market over the last year. Another good property market is the Philippines, with its 7% GDP growth, 2% population growth and strong property price growth and still reasonable yields. It is also a relatively strong currency. More importantly, Japan has a public sector debt of 200% of GDP. There is every reason to believe a fair slug of that will be repaid by debasing the currency in the next decade, as the US and Euro zones do likewise.

He does make a good point:

"One of the biggest is in the preference for new property. In Japan, used homes represent about 13% of total sales, compared to 78% in the United States and 89% in Britain. That is changing, as the Japanese government encourages the construction of long-life homes, but many people still see homes as consumable items".

The significance of this is that a steep discount applies to old housing, such that you can buy an old house for essentially less than zero in the foreclosed market. People do not want old housing, particularly due to the lack of insulation, but also shoddy building practices, lesser durability.

He makes a good point about buying rural property. The population rate is expected to collapse in rural areas, so the closer you can live to major cities the better. The flipside is that wasteful use of infrastructure might result in either tax incentives for rural areas, or eventually stronger migration. The cheaper that rural property becomes the more attractive it becomes for other purposes, whether lifestyle activities or other activities. It must be acknowledged that people have a far higher level of mobility than in the past, so we do have to question old paradigms.

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

Dealing with overlapping foreclosed property boundaries

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com

A person has asked me a question about foreclosed property. From the outset can I say, I love to help people. The problem is that I have the power to help a great many people through books and the internet, and would like to do so in the interests of the greatest number. I also have a personal interest:

1. Your best interests. I put a lot of thought into the book. Asking me questions on the fly is going to waste my time, and offer you a less than satisfying answer. If this person purchased the book, that is fine, but I believe I dealt with this question in the book. In any respect, the purpose of this website is to apply the principles of critical thinking to investment - that is 'your critical thinking'...not mine. Its ok to make a mistake, so long as you self-reflect, learn and improve. I cannot provide self-assurance through every real estate transaction, I can only offer a minimal service. Real estate agents charge huge fees for a customised service. Partly I want to offer a reply to this because he might have received bad advice...depending on his circumstances...only he should decide.

2. Sustaining myself. This is not a non-profit exercise. The less money I make from books, the more time I have to invest and trade stocks. The two do not go together very well, because there is a huge compulsion for me to watch the equity markets, which means researching stocks. This can involve researching entire industries. For this reason, in the long term writing has to be profitable.

I do answer questions when asked on most occasions, however I would hope you would just buy the book because that is why I wrote it, and I really want to finish other books....and of course I need to watch my gold stocks. :)

Now - problems with houses overlapping property boundaries

The writer asks....[I summarise for the sake of privacy]....

I have saved up about US$10,000, so I am aiming for a cheap rural property to start off with. I am looking at a place in a rural area with a minimum bid of about $8,000, the agent I am dealing with has told me to let it go and wait for another property because as it seems, part of the house (literally not even a foot of the corner) is technically on the neighbours property. The house is huge, with enough room for a garden in the back and is in a good location for what I need, so I really don't want to pass up a house in my price range just because the neighbours might try to muscle some cash from me.

I just thought maybe you could give me an opinion on what I should do because you actually know what you are talking about.I was thinking I should bid anyway, and hopefully get it for $9,000-10,000. Then try meeting the neighbours, explaining my situation, befriending them and hopefully they won't mind that a foot of my house goes into their massive block of land. If they were hostile, I could always just renovate the house, as the actual part that is on their property isn't part of the main house and I could either knock it down or hire someone in to renovate the corner off and keep the house within my limits. Or a third option, I thought I could offer the neighbours some cash for the 1-2m strip of land that borders our two properties. Those are just some thoughts I had to get around this obstacle, as I have definitely fallen for this property and really don't want to lose this chance.

My response is that if the property is perfect than you should buy it...but is it perfect. Identifying such 'hot opportunities' is what investment is all about. Japanese people don't like to deal with conflict. If you are a Westerner dealing with a foreigner, they might have contempt for you. Some are very friendly and accommodating though, so it can do either way. There is good news...they cannot demand that you destroy your home, and they cannot destroy it under some vexing threat. They could take you to court, but Japanese tend not to do that. In most cases a person will negotiate to swap some land, i.e. I had a house like that, and the counterpart gave me extra land, and I gave him extra carspace. Some might not want more land in this economy, and might want more money....and they might want excessive money, and treat you with disrespect, so this is the risk, and this is partly why the property is cheap...but its also cheap because its rural. For this reason, I think you could have a gem. Congrats on finding it! But don't jump yet...Why take risks you don't need to. Why not talk to the neighbour and get an agreement before you buy. There is of course the risk he might bid as well. Hmmm...Difficult issue...but not a lot of money to waste. The issue is I think awareness of costs. It might cost you Y50,000 for a surveyor to resurvey the land, and then you need to have the title transferred. I can't recall what I paid for that....maybe another Y50,000. Hopefully you will not have to pay for land, if you can swap. If he is extortive in buying off the 'offending land', it is his concern because you are using it rent free. He can only take you to court....but the issue is...he can make you pay 'psychologically', so you might need to have a stronger 'stoic' personality...and thus like stress. If its a rural person, they can get the community against you. I personally think its far easier if you have a Japanese wife to help negotiate a settlement. Foreigners smell like roses if there is a Japanese person involved. I would suggest that you try get an easement for the land, as well as the mere property boundaries...and I would suggest you ought to give him the better land in any swap, and pay for any surveying. So I think its a good deal for you..as its incremental expenditure....and it could go really well.

I also think a 'corner' of a property is easy for the neighbour to excise, but it will depend on the specifics...but its probably true he does not benefit from any of your land. This is a common problem in Japan. If you have a problem, maybe you can get a public notary, a local govt legal advisor or a person they respect to adjudicate. Or any children they have if they speak your language. Most Japanese children hate their parents, so you might have a real ally. :) joke lan.

I think you should not wait....and I'd just take the risk because if its so cheap, you are merely scaring the neighbour into buying it themselves, as they might not want to live near a foreigner....particularly as its so cheap. Even if they have no money, they may badger their kids in the city to buy it for them. I think its a prize - grab it if its a decent place to live...there are plenty of such houses in depopulating Japan.

Anyway, here is my answer! Bargain, but as a lifestyle block...hard to sell because of depopulation, and it might be hard to rent to Japanese, so try foreigners, as it sounds like you will be close to international airport. Personally, you might find the agent is your competition. Don't deal with agents...or maybe he is just not a critical thinker. I find asking uncritical thinkers can only cloud your good judgement. Be strong! Japanese are overtly 'too safe' so they don't work through problems readily if they can pay more to go around them.

Thank you for confirming 'independently' that there are real bargains in Japan....and so close to an international airport....for foreign buyers. Well done! Glad you asked the question. :) Frankly, you had me at hello! lol

Buying foreclosed property in Japan

It has been a while since we described the opportunities to buy foreclosed property in Japan. The lowest priced properties are of course in the rural areas. For example, in order to impress upon you the opportunities, I did a random search of properties on the http://bit.sikkou.jp website.

You will need to use a translating tool like Google because the website is in Japanese. Court documents are in Japanese as well. I am used to dealing with these documents because they are in a standard format. Maybe you can find a Japanese student if you need help. Pictures convey a thousand words, and the court gives you 10-20 photos. They are very fair minded, with an attention to detail.

I chose one of the cheaper rural areas on the more populated East Coast, close to Osaka City. The region is Wakayama. It is a Y2.1mil ($US22,000) two-storey house, basically $10K for the house, $10K for the land. Some houses have been trashed. This place is untidy, has some 'collateral damage' from the alcoholic who is currently residing in it. How do I know? Well there are crates of alcoholic bottles sitting outside the premises, and at the time the house was photographed, there was still someone living there. If you visit you can find out if he is still living there. Talk to the neighbours. The property detail inside also suggests atypical damage and regard for the property, but really such issues are cosmetic given the price you would be paying. Structurally, the building is probably find. You will likely go there to confirm. You have a period of time during which the courts will help you evict the previous owner. That is of course assuming its a problem. Most leave of their own free accord. If they don't most people simply pay them off rather than go to court. There is a process whereby you can pay the court to store their possessions, but since the evictee needs money rather than a court drama, most simply leave with your cash incentive. Better not to deal with drunks with a chip on their shoulder. How do you know? Talk to the neighbours, establish if they have moved out already. Fortunately, the courts photos give you a great deal of info on the tenants/owners, and they are very fair in their property description. Remember, in Japan you are dealing with the court system, not some agent with a vested interest. This $US21,000 house is 102m2, so its typical Japanese/European size. The land size is going to be small, but if its a holiday house, I think most of us would be happy with a 'crap hole' if you are only paying $21K. Land rates on this property are probably $300 per year, given the location and age of the house, and given the small investment, you would not even bother insuring it.

These types of places are great if you are free to work from home and travel, like being a programmer or graphic designer. In Japan you can get pre-paid internet modems, and no place is too far from the shops. A scooter is another great accessory to get around, or because of great infrastructure, even a bicycle is enough. What more do you need? You need to look at more properties. I use the hyperdia.com tool to find train stations to locate a property, then the map provided to find the specific address. I use Google Maps to look around the vicinity of the property, both the street and satellite view. Train lines are important. Make sure you are buying land, as opposed to buying a house with a lease of land.

All the best with your search!

NZ Property Guide Philippine Real Estate GuideForeclosed Japan Guide

AuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Interesting property markets

New Zealand (North Island, countryside)

There are several appealing markets in which to buy property. Among the markets we cover, we consider the best buying to be the Philippines for capital growth, as well as satisfactory yield. Japan offers compelling yields, however there is less prospect of much capital growth in the medium term. Mind you, since the government will likely resort to printing money in order to pay off the public sector deficit, expect some nominal price increase in property and equity assets, but of course that will be inflation-based. They might however be offset by higher property taxes and a GST increase. I see no new taxes in the Philippines, just higher compliance measures. Despite high nominal taxes, people in the Philippines pay amongst the lowest taxes in the world, i.e. 16% of GDP. Its a good deal if you can scam it. Don't be a proud taxpayer....most of your taxes goes to corrupt people, or serves inefficient purposes. You are the best custodian of your money. No one respects it as much as the person who earned it. That which was well-spent you would have been happy to finance if you had a choice. Don't believe you had a choice when you voted in the last election. You have no real or effective choice.

The NZ property market is less appealing at the moment. The currency is consolidating around 0.70 USD and there is the prospect of rising interest rates constraining price growth. Equally problematic is the exodus of NZ'ers to Australia. NZ population growth is just 0.5%, with the exodus of NZ'ers balanced by Asian and other immigrants.

Some commentators are expecting a collapse in Australian property prices. Frankly, I don't see it when the economy is supported by a lot of commodity projects and immigration. Expect business investment in the mining & energy sectors to remain strong. The Resource Rent Tax interestingly will hurt, particularly if they talk about it, then decide to defer it, or not do it. It will leave investors in limbo.

Another positive is the tight housing supply. There is no doubt this is due to the hefty increase in immigration. Immigration to Australia has risen from 100,000 in 2004 to almost 300,000 today. It was doubled from 2007. Clearly the government saw immigration as a means of avoiding recession. It looks like the govt wants to use immigration and mining taxes to finance the retirement of babyboomers.....as opposed to doing what it ought to do....removing the cap on private sector activity. By cap I mean the excessive involvement of government in the economy...stupid arbitrary statutory law, subsidies, welfare transfer payments, etc. Sound idealistic? Well, you would be surprised how counterproductive these measures are at remedying problems. Government solutions are the problem.

1. Housing affordability a dream? Blame the arbitrary restrictions of government zoning which prevent land lot availability.

2. Can't get a job? Blame government cumbersome planning approvals, and most particularly public infrastructure funding and minimum wage limits.

3. Can't make money in a volatile investment climate? Blame government for distorting 'free' markets to ensure they get elected. They don't care if they channel billions into wasteful, unproductive investment, just as long as they get elected.

4. Can't find good workers? Blame the public education system which offers a low-standard for the private sector schools, which fake it, and sell their reputation.

5. Can't even make good friends? Blame a political culture which sets the standard in self-delusion, political correctness and subjective value judgements. Same for forging lifetime relationships. Divorce rates manifestly come from the same problem.

NZ Property Guide Philippine Real Estate Guide Foreclosed Japan Guide

AuthorAndrew Sheldon Applied Critical Thinking | 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

Establishing a backpackers business in Japan

Japan must be one of the best places in the world to establish a backpackers. I can think of several reasons why I suggest this:
1. The EXTREMELY low price of foreclosed property in rural areas
2. The lack of backpackers in Japan - they do have other options, eg. Guest houses, ryokans, YMCAs.
3. The availability of cheap Japan Rail passes for foreigners in Japan
4. The different cultural experience offered by Japan for foreigners
5. The very attractive Japanese nature

For an example of the cheapness of property in Japan, check out this place. I concede that this place needs some maintenance, but its hardly expensive at Y880,000. This is a file I downloaded from the Bit Sikkou website after just 10 minutes searching (randomly). If you want to efficiently screen these properties, the best approach is to use Google Maps to find the property location and download the PDF file at the bottom of the property descriptor. This descriptor provides many photos of the property, giving you a good idea as to whether further investigation is required.
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Andrew Sheldon www.sheldonthinks.com

New Zealand Property Market Report 2009

New Zealand's two major cities: Auckland and Wellington are ranked at top 10 best places to live on earth. But there are many more cheaper cities around New Zealand like Christchurch, Dunedin and Otago on the South Island. Some of these smaller cities don't even rank a mention in international surveys because they are too small to rank on some analysts radar. British, Americans, Germans consider it a vacation of a lifetime to explore the whole country. Why? The beautiful scenery, first world country standards, friendly people, an abundance of outdoor activities, low cost of property and the lifestyle. New Zealand's scenic beauty has long been recognised. It became the set for movies like "Lord of the Rings", King Kong (by Peter Jackson), The Last Samurai, The Piano and The Frighteners.
The current economic recession has immensely devalued the New Zealand Dollar which makes it a perfect opportunity to purchase property in New Zealand. On top of the majestic scenery, New Zealand is a tax haven for foreigners. There is no capital gains tax, transfer taxes, VAT/GST or wealth taxes in NZ, so rest assured that NZ property is tax-effective!
Learn how to buy real estate in New Zealand and enjoy the benefits of a first world country in a first class nature setting. For more details.....
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Andrew Sheldon www.sheldonthinks.com

Plunging NZD offers excellent property opportunities

Every time the world plunges into recession we witness a collapse in the NZ and Australian dollars. These small nations (NZ 25% the size of Australia) are the most heavily traded currencies in the world based a per capita comparison, and without a doubt the most volatile currencies among the OECD countries. The cyclical nature of their trading makes them compelling opportunities for not just forex traders, but property investors as well.
Now NZ asset markets are still falling so you might think its premature to start buying property in NZ. It is true that city property is still too expensive. True enough! But there are bargains to be had in rural areas. Properties offering attractive yields, and of course the appealing forex rate, so for the next few years you will be able to pay off your mortgage in quick time. You can then use the property to pay off other loans as you acquire more property, knowing that when the currency starts rising, you would have established a self-funding asset position in the country.
We think that in the next 6 months we are going to see the NZD fall to its historic low of $US0.40. The implication is that the NZD will have halved in around 18 months. We all know of the fate of Iceland. Three quarters of Iceland's businesses are bankrupt. Well, NZ is not nearly as indebted to the outside world, but its concerns will weigh on its currency. NZ is however in a much better position because of its food export earnings. But we will nevertheless rejoice in the weaker currency, taking every opportunity to buy more property and pay off our first. At some point we will start buying urban (city) property, but we are a long way from that point.
I don't know of any country that can match the yields of Japanese foreclosed property at the moment, but for property investors interested in flipping NZ properties, the volatility of the NZD currency must appeal.
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Andrew Sheldon www.sheldonthinks.com

Selective property purchasing in NZ

The NZ property market has yet to reach its bottom, though we need to be careful drawing generalisations. We have already entered the market - as of 2 weeks ago. The reasons are clear:
1. We did not buy in an area that was over-priced
2. We bought in an area where the history was depopulation, but the area is open to a paradigm shift
3. We bought the worst house in the best street, close to services
4. We bought a house which has loads of potential, with elevated views of the sea
5. We bought a house on a deferred settlement basis
6. We bought at a low point in the NZ-USD and NZD-AUD

We wanted to be on the coast, but at the same time close to services. We did not need or want to be in a large city like Auckland, Christchurch or Wellington, though we wanted reasonable access to at least one of those cities, as well as access to regional centres. Wanganui-Castlecliff is 2 hours from Wellington, 6 hours from Auckland, 1 hour from Mt Ruepehu (volcano), snow skiing, as well as being on the doorstep to a beautiful hinterland. Wanganui has a good beach by my standards (elongate, arcuate, with surf zone, little traffic), and the town is actually well-serviced. It has several shopping centres, a number of entertainment facilities with something for everyone. Internet services are relatively expensive, but speeds are ok.

Looking at the property itself, we purchased a 2br house with study for $NZ78,000 ($US44,000). We paid cash because it was hard to get finance. We did however require deferred settlement so we could get the best exchange rate. The house was built in 1910, it has excellent (14 foot) high ceilings with wood panels, timber entry aisle, and sweeping views over Castlecliff, which we will enhance by adding an elevated sunroom to the back. The high ceilings in the front of the house will mean there should be little difficulty getting approval for the extension.

After some basic repairs we would be able to rent this property for a gross rental yield of about 8.5%, though we actually intend to live in it whilst we do more substantial improvements that should lift its value to closer to $180K. The 760m2 property is actually on a ridge with sweeping views over the area. The improvements will include a retaining wall, creation of a garden and patio area, the upgrade of the bathroom, and finally the sunroom above the bathroom. Having completed all those works, enjoyed the premises, and allowing for 1-2 years to pass, we might just be in a good position to sell and move on to the next opportunity. At that time, we would expect the NZD to have recovered against the USD and other currencies.

We bought a place here which is offering 7% yield (unleveraged), though we can lift that to 9% with a bit of basic maintenance & improvements. The move substantial improvements will lift the yield slightly, but its really in the re-sell value where it will add the greatest value, which why that investment will be deferred. The sun room will be a great place to write, particularly to capture the early sun in winter. This room will always have sun on it.

This investment was a great investment for us because it consolidated a large array of positives. It made favourable use of exchange rates, it recognises a future change in Wanganui property values, it makes sensible use of capital, and it was also pleasing from a lifestyle perspective as well. All we need to do now is to buy another property to make better use of our capital. It does not make sense to pay cash for a house. :(

I am already preparing a report on my experiences buying and renovating a property in New Zealand. You can place orders at our e-Store.

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Andrew Sheldon www.sheldonthinks.com

Asset prices in Japan are still cheap

The Nikkei 225 Index reached an all-time high on Dec 29th, 1989 of 38,957 points before plummeting to 8422 points in May 2003, some 13 years later. On 28th Oct 2008 the Nikkei-225 reached a new 26-year low of 6994.9 points, meaning that the collapse (from the 1989 peak) of the Japanese market has taken 20 years. We can be fairly confident that the Japanese economy, has bottomed, but we cannot ignore the ‘policy paralysis’ that has Japan stagnating for 2 decades. The Japanese government has done very little to reform the economy; instead relying on exports and government spending for stimulus. Now, in the wake of the global collapse, Japanese export markets will dried up.
The positive implication is that the global crisis will force the Japanese government to reform its economy. For this reason there can be few better places to invest than in Japanese property as long as the focus is on the major cities which are experiencing regional population growth.
Since Oct 2008, the Nikkei-225 has recovered to 9,319 points, and its soon to test its previous high around 9,500 points. The yields on Japanese property give similar confidence to the property market, but equities are always a leading indicator.
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Andrew Sheldon www.sheldonthinks.com

Currency dynamics impact property decisions

One of the big benefits of having a portfolio of international investment properties is the benefit of being able to buy properties based on local fundamentals, but also with an eye on international currency movements. For this reason I am currently in NZ, and I've just purchased a property for $NZ78,000 (or $US 41,000) based on currency conversions at this point. Its a buyers market at the moment so I was able to buy this property from some panicky old people, but also managed to get 3 months deferred settlement and I only have to pay nominal rent of $70/week before we reach final settlement. In case you are wondering what I got, I purchased a 2br home with a study on 756m2 of land in a rural town with a population of 44,000 very friendly people, 2 hours from a majority city, and just 2km from a lovely beach. The broadband signal on the beach was not so good so we opted for 2km away. The property was listed for sale at $NZ99K. There were bigger bargains but this suited us.
Why this property makes a lot of sense lies in the market dynamics and the global currency movements. Here are the reasons why the NZD has taken a major tumble:
1. The carry trade: The carry trade has broken but it will rebuild. The implication is that NZD again looks like good buying. Confidence will rebuild in NZD as the country is now more competitive than ever, and its a major food producer. We might not pay as much for premium food, but we will continue to eat, and the food market fundamentals don't look bad either, which is why we like the rural market
2. Rural areas - some parts of NZ have been undergoing depopulation so property prices have not fallen. Some areas which were depopulating are now growing, so in certain markets the dynamics are changing. Rural areas like this which were yield propositions are now growth propositions.
3. Tax benefits - NZ has some very attractive elements which favour investment. These include no capital gains tax on property, no transfer taxes, no GST. The 4% agent commission is levied on the seller.

NZ is also getting punished because it has a lot of debt, but one needs to appreciate that its terms of trade just improved a heap because its currency is weak and commodities (which it exports) are denominated in USD. The other attraction is that one-third of its external debt is denominated in AUD, and many will realise that the AUD roughly tracks the NZD, and that at a time of weak metal prices, the NZD might actually do better. But importantly the NZD is essentially not exposed to AUD.

I have attached here some charts showing just how attractive NZ property is in your local currency. Oh...and did I mention that NZ has some of the most open foreign investment and migration regimes in the world...because too many technical people keep moving to Australia for higher pay. The benefits of investing in NZ are particularly good for the Japanese, Europeans and anyone from a US-denominated currency. Its also one of the most beautiful countries in the world and contrary to my initial view people can be really friendly in this country. My earlier holiday perceptions were wrong.

www.sheldonthinks.com

Property sales in NZ

At the moment I am in New Zealand. I arrived about 2 weeks ago in Auckland. The appeal was a swag of cheap property for just $NZ80,000-100,000. Some are in really bad locations like the cold part around Southland, but others are close to major cities. I am in the process of preparing a report on the property market here because the country makes a lot of sense for Americans, Britons and Japanese based expats, assuming you dont mind the distances. It suits writers like myself or the semi-retired.

The attraction of NZ is the prices, the spectacular scenery, and contrary to my previously uninformed view after 3 fly & drives here, NZ'ers are actually very friendly people. There are drive-by shootings here related to gangs, but nothing that would make an American flinch. I've even seen Japanese tourists here. Usually the gangs shoot themselves.

Anyway I bought a Holden 2001 Combo and have travelled south of Auckland stopping off at all the real estates. Some really beautiful spots to be seen. Actually I prefer the South Island, but actually I am looking at a place close to the beach. More details in coming weeks. The real attraction is the weak NZD. The first thing I did was buy a car to send money, then I bought the car for $NZ5,000. Actually I organised to view the car after looking on the internet. The dealer even picked me up from the airport. Great little car/van. Its a 1.4L engine so great fuel economy for touring, and I'd happily sleep in the back if I was camping out, as I intend to do alot of mountaineering and kayaking here. As soon as I buy a house I will be buying an inflatable kayak. I want one this summer. Can't wait until I go back to Australia or Japan.

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Andrew Sheldon www.sheldonthinks.com

Cheapest property in the world

Here is a candidate for the cheapest home in the world, and its no demolition site either. This is a very good quality house near Kisakata town in Akita Prefecture, in northern Honshu, Japan. You might be wondering how you can buy a house so cheap in Japan. There are several reasons:
1. Few holidays: The Japanese embrace universal suffrage. Nope, nothing to do with voting, though that is hardly a stretch. The Japanese don't believe in recreation that goes beyond a weekend. So if they can't get there in a weekend, then they dont do it. Few Japanese people have holiday houses because they either can't afford it, they work so hard, or they just are scared to depart from routine. I dare say I have seen more of Japan than 99% of the population, and I've been there just 3 years.
2. Depopulation: This property lies in the northern provinces of Japan which is subject to depopulation. For this reason there is excess housing stock. Parents are dying and children go off to the city for work. This trend might diminish in the next 5 years as food prices increase, but dont count on it, as there are lifestyle reasons for leaving as well.
3. Financial literacy: The Japanese generally dont get much financial literacy education so they are reluctant to take risks, even those which are 'manageable'. Risks are avoided rather than overcome. Safety first.
4. Foreclosed property: This is a foreclosed property, so its particularly cheap. The natural market for this property is local people, but they are not so aware of foreclosures. Owners and family are too ashamed to talk about such things, no one has any money, and no one wants to live here as there are no jobs.

So why would a foreigner want to live here?

I can think of a number of reasons why foreigners would want to live in this area. If they have a tourist visa its easy to get here and travel around on a Japan Rail pass. The cost of the home is just Y0.874 million ($US9,000) - at least that is the minimum bid, and I suspect there will not be other bidders. You can stay in Japan 3 months before you have to leave the country, or go to Korea for a weekend to extend your holiday. I did that for a year.
So you want the details?

This foreclosed property comprises 955m2 of land and a 2-storey house with a floor area of 56m2 downstairs and 35m2 upstairs. Its a small house, but surprisingly modern looking at the photos of the interior. What an idyllic location. I can just imagine Mary-Loo Taylor coming out the front door in dance & song to pick the strawberries and milk the cow. In addition there is a storage shed as well. More remarkable is that this house has no immediate neighbours - a rare feat in Japan. Probably one of the few places you can play your Van Halen CDs and not get arrested - as Mary Loo unfortunately was.
So how to buy?
This foreclosed property is sold through the Akita Prefectural Court through a tender system. If you need further information consider buying the Japan Foreclosed Property Report 2008 above. It describes my experiences buying foreclosed property and the information I gathered in the process. I am also offering population charts in the Saitama & Tokyo area for those who are interested. I do believe this is likely the cheapest property in the world. Its a paradox that it should be found in Japan given that its so hard to escape civilisation in the country. A great place to live if you are not a local.

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Andrew Sheldon www.sheldonthinks.com

The cheapest house in the world

I have decided to go on a pilgrimage - a journey - in search of the cheapest house in the world. You might think such a place is to be found in Africa or the Middle East, so let me set some criteria:
1. It has to be a man-made structure
2. It has to be a modern structure
3. It has to be a fixed, free-standing structure
4. It has to be for sale
5. It has to be modern in the sense that it can support modern electrical appliances
6. It has to be livable - no burnt out homes or homes due for demolition

You might think think the place to find such homes would be in Africa or other poor countries, but actually I like they are more likely to be found in Japan or maybe Australia. I have looked for the cheapest houses in Australia some years ago. Its interesting what you can find.

Anyway, the competition starts today. The target price is $US5,000. I am cautiously confident. I know there are places in Japan and Australia where private citizens (Aust) and governments (Aust & Japan) are even giving away land. But the intent of cause is to get you to build a new house. We want to buy one for a fraction of the construction cost. The cheapest house I have seen was in Shizuoka in the hot spring town to the south - it was around $US9,000. It was quite well located in a small tourist town at a rail head. But that was 4years ago.

In Australia, about 5 years ago I remember seeing on the internet house & land for around $40,000 in the Snowy Mountains in places like Batlow, near Tumut. But it gets even cheaper, as I remember seeing old abandoned houses for around $10-20,000 in the outback of New South Wales. Of course few people would want to live in such a place. No jobs, probably hopeless internet, small depopulating towns with few services.
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Andrew Sheldon www.sheldonthinks.com