TPPA to rejuvenate Japanese agriculture in short term

One of the interesting aspects about Japan is the irony of the place. I say this for a number of reasons, among them:

1. A nation that pays its farmers not to plant crops
2. A nation, long famed for the most expensive real estate in the world, that perplexingly has the cheapest property, in the most convenient locations that Westerners could imagine
3. A proud nation lacking in constituents with self esteem
4. A considerate nation lacking in empathy for others

On this note, I draw attention to another prospective opportunity for adventurers that might gain traction, if only because it is 'counter-cyclical'. Japan is one of a number of Asian Pacific nations that is reforming its trade laws. Japan has long been open to trade reforms, however the nation has oft resisted these changes because:

• Change was considered electoral suicide in Japan - particularly the topic of farm support
• Food security was considered a key consideration

Today, priorities seem to have shifted, and so there is good reason to believe that Japan might in fact support agricultural and trade reform. The reasons to suspect this are:

• The prospect of importing cheap food from abroad
• The high cost of living in Japan due to high food costs, and its corresponding impact on low income families, who are growing in number
• The declining importance of farming due to the aging population
• The appeal of opening up trade opportunities for Japanese industry, even if that means corresponding closure to a long history of mercantilism on agriculture
• The spiraling Japanese public debt, and thus the corresponding need for Japan to end its subsidies on agriculture

We might then wonder whether Japan is seeing the writing on the wall, and thus dropping its previously mercantilist strategy, for what might be construed as a far more enlightened and fairer posture to all concerned. Paradoxically, it appears this strategy is having the opposite affect. The Japanese government has increased support for Japanese farmers to stop rice farming. i.e. This funding could be construed as:

1. A payoff to ease the burden on farmers entering retirement, i.e. The bulk of Japanese farmers are over 65yo, working small land plots compared to their competitors, with modest farm equipment.
2. A capital incentive for Japanese farmers, where they remain committed and their farmlands prove suitable, to opt for a different type of agricultural product, that is more sustainable in a post-reform era.

The implication is clear. There will be several changes in the post-reform period:

1. More commercial acumen as committed younger farmers and corporate farmers have positive incentives to shift to more marketable, higher margin crops. Clearly in the past, the guarantees of farm support only gave Japanese older farmers the incentive to persist in what they were doing, so they just became more 'entrenched' in protectionism. 
2. Higher economies of scale in the new era. There will need to be a great deal of consolidation of existing farms. Most likely we might expect farmers, not to sell their land, but instead to lease lands for a modest retirement 'farmland' income. 
3. Greater land availability. It is inevitable that some of this land will become available to 'new farmers'. The question is whether it will be quality land, and whether the 'shards of land' offered will be desirable in the new era. After all, corporate farmers will want to consolidate their interests, and not have their interests scattered across the country. There is every reason to think that they are already identifying the farms with the greatest appeal in terms of access to markets, fertility, and centrality to their existing interests. Notwithstanding the appeal of 'proximate land', the corporate farmer has a trump card up his sleeve. Japanese agricultural land is zoned for agriculture, so corporate farmers will know that, even in 'growth areas' close to cities, there will be land that retiring farmers will have no choice but to accept a 'low-price' deal in order to secure use of land. 

The opportunity of course to buy farm land in Japan is not restricted to Japanese nationals, however there is a need for any investor to pay membership dues to the Japan Agriculture Association (JA). The appeal of farming in Japan is strong for a number of reasons:

1. Low yield, low margin rice farming lands are going to give way to higher yielding, higher margin crop selection
2. Asian crop competitiveness is destined to fall as farms in Asia's emerging markets prefer to work in factories rather than on farms. This of course will take time. 
3. Higher farm equipment utilization rates can be expected to cut farming costs. Historically farmers in Japan, whilst cooperative, have not been particularly engaging when in came to sharing farm equipment. This, and the smaller plot sizes, resulted in small scale farm machinery, which is an approach mirrored in Asia, and otherwise a boon for Japanese farm equipment manufacturers.

The other appealing factor is the possibility of buying cheap and moribund 'scrap' infrastructure at auction. A great number of Japanese farmers have gone broke, and retain shards of Japanese farm lands and infrastructure as a result of poor business and lifestyle decisions. Some have become alcoholics. In any case, a substantial number of properties have ended up in the courts as foreclosed properties. Given the prevailing attitudes to farming in Japan, this does offer a counter-cyclical opportunity for others. Consider that:

1. Japan is reforming the sector
2. Japan's hinterland has amongst the best rural infrastructure in the world, with great connectivity to the main Japanese cities, i.e. Rarely is an isolated rural hinterland more than 90 minutes train from a major city, or three hours from a mega-tropolis like Tokyo, Osaka, Fukuoka, or arguably not Sapporo (Hokkaido). Yes Sapporo is substantial centre, but the cold north is not well suited to agriculture anyway, given the cold climate, or short seasons. 

If you are more interested in Japan's farm sector, and the opportunities to buy farm land in Japan, consider our Japan Foreclosed Property guide. Most of the buyers are 'small scale' Westerner farmers married to Japanese spouses, however there is scope for those with greater capital resources to seek a business visa for the purpose of pursuing a farming business. This obviously requires vetting by the Ministry of Foreign Affairs of your business proposal.

The strategic opportunity in Japan could be considered to lie in the future of Japan. Consider that Japan is struggling to kick-start its economy. There is every reason to think that objections to immigration will be swept away by economic imperatives, and that more Indians, Chinese, Filipinos and Koreans, will mean the introduction of more restaurants with 'peculiar' or exotic food supply needs, and the expectation that this produce will be supplied locally in Japan. This is therefore an opportunity to anticipate if one sees Japan moving in the same direction as other Western countries.
It seems however that it is the Trans-Pacific Partnership Agreement (TPPA) that is to kickstart Japanese agriculture. It is probable that the opportunities to buy foreclosed Japanese rural property will be in this early stage, and that latter-day entrants will be left to fight over infertile, remote land in the 'full priced' private property market.


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

Land price rise highlights the reform initiative - but more required

One gets the sense that Abe is causing a lot of angst in Japan. The positive side is that he is appealing to all interests, whether its nationalists, conservatives, and even liberals. He is causing a lot of controversy and derision for his policies as a result; but might in the process he win favour for simply 'doing something' big. Its early days, but Abe is doing a number of important things:
1. Constitutional change - We are hearing 'noises' from liberals (mostly lawyers), but aren't indolent Japanese citizens destined to simply trust him to take them on the right path. We might wonder if the provisions sought are the end of the story, or a precursor for more power. From a collectivist government, that cannot be a good thing, even if the threat posed is not Abe, but a latter leader. But then maybe those constitutional protections were never what we wanted or expected. NZ seeks no less protected than any other nation 'with a constitution'.
2. Tax increases - Not something to celebrate but at least the government is addressing the fiscal imbalance. Does a reform program need more spending or less? I would argue more private spending and less government spending, but that is not going to occur until the private sector sees real progress, so he could be forgiven for spending.
3. Immigration - Recently we have seen the Abe administration open the nation to Asian tourists, as well as the adoption of a new class of visa. i.e. Gaijin ('foreigners') under the proposal, if they have good jobs, stable incomes, needed skills, are destined to be offered permanent residency in Japan. This is surely a measure to improve population demographics. i.e. Aging population, rural depopulation.
4. Child protection - After decades of inaction, there are signs that Japan is finally entering the fold for the protection of children caught up in international marriages.
5. Stimulus - This is perhaps the less impressive move, though it was a brazen some compared to the historic legacy. I would argue that it did not achieve anything, however you could argue that it did boost economic activity in a period of transformation. But its not really happened yet. Perhaps it was only meant to 'encourage people', so the real action would be favourably received.
6. Higher land prices - Land prices had bottomed in 2006, however they have been lacklustre of late, but more recently still, they show signs of improvement. Signs of inflation are not enough though, the government will need to do more to post real wages as well. It has encouraged businesses to do so, but to no avail yet. Consider however some reforms.
7. Trade reform: Japan has been an enthusiastic supporter of tariff reductions. Until recently, it was reluctant to cut tariffs on rice, however concessions have been made, and policies have been adopted to reform agriculture in the nation.

In my book 'Japan Foreclosed Property', I discuss how in the last few hundred years that Japan has been moved by both external and internal events to undergo enormous transformation that raised the nation to prosperity. i.e. After Admiral Perry's entry and during the Meiji Period. The latter are just some of the measures. More important than the 'number', is the nature of them. They are pretty drastic steps for Japan. Westerners benefiting from these reforms, particularly the opportunity to live in Japan, would do well to consider how they might benefit from their 'distinctive cultural differences' in a nation which is pretty homogeneous in its thinking. After all, this is why Abe is trying to break Japan out of its comfort zone. Its happened before, and it seems to be happening again. We have patiently been waiting for it!

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Skilled workers in Japan offered permanent residence

The Japanese government has signalled its intention to relax its visa requirements for well-paid, foreign workers. These “high-quality human resources” (if you still feel human) will be permitted to seek permanent residence for an indefinite period in Japan. Being ‘Japan talk’ one might suspect that ‘indefinite’ is only until they decide otherwise, as you are not a citizen. It remains to be seen however whether those people will be able to secure welfare. i.e. If they lost their job, would they be given access to the welfare system, and for how long? Will they be kicked out? Of course, none of this bothers ‘high calibre’ people with flawless lives. However bureaucrats are plenty flawed, so we might expect them to make mistakes selecting applicants.
The amendment of the Immigration Control Act is targeted at researchers and engineers, who will be appraised on the basis of a points system. Issues to be considered will include factors such as annual income, employment history, and the continuity of the applicants stay in Japan over the perquisite 5 year period. Certain applicants will be given preference, so they will be able to secure “permanent residence” in just two years. The successful applicants will be given the status of "No. 1 Advanced professional” or “No. 2 advanced professional”. The visa will also provide for travel by the applicant’s parents.

One of the most appealing aspects of these provisions will be the prospect of workers in Japan having the flexibility to live there. I would however caution the parents of these applicants to travel around Japan as a tourist before you apply for this visa because you will lose the benefit of being a tourist - namely the Japan Rail Pass. Another appealing aspect for the applicants will be the prospect of their parents being able to freely enter Japan, and even live in Japan. This has great appeal because you can imagine that:
1. Parents can live half year say in their home country like the Philippines, Thailand, China and the United States
2. Children can buy a foreclosed property in the depopulated rural areas of Japan for their parents. These houses can be bought for as little as $10-15,000 when I looked.

Japan is struggling to attract people into its rural areas. Might we expect a revival with liberalisation such as this under consideration. Such provisions are likely to have mixed results. We might expect people to welcome the prospect of money and development that it brings, but they might also experience a shock from the cultural clash, as elderly foreigners in Japan might be expected to bring 'stoic' ways from the old country. In any respect, it will add a dynamic to Japan's rural areas. Of course this type of living is not for everyone. But it will surely appeal to those high income 'high calibre' migrants from the developing world, who will be looking for a better life for their parents, as well as the support that only parents can provide.

One of the fabulous aspects of living in this period is the new options or flexibilities that are made possible as barriers between countries dissolve.

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

The threat of earthquakes in Tokyo, Japan

Here is some important information for people buying property in Tokyo; and in fact anyone buying property in Japan. This story highlights the risks of buying property in Japan. There is an expected risk of 10,000 fatalities for a central Tokyo magnitude 7 earthquake. The good news is that the earthquake risk is not equal; and whilst anyone can be lucky or unfortunate in a certain context (i.e. because you cannot choose your moment), you can of course improve your odds by buying in the right location. This is why I bought in Western Tokyo, and why I took it upon myself to write about the earthquake and tsunami risk in my eBook on Japanese foreclosed property.

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Japan's property - cheapest in the world

According to a recent survey, Japan has the lowest housing prices in comparison to income. I encourage expatriates and Japanese people to look at the foreclosed property market because houses can be bought very cheaply through this route. I bought a 5br dormitory just 1hr train from Tokyo City Central in 2004 for just $US28,000. The nice aspect is that you can get these houses cheaply because:

1. Japanese people are so superstitious - they have this fear about ghosts and yakuza

2. Japanese people fear conflict with former tenants and landlords. I have found the contrary, that owners simply want to stay there to get cheap rent as long as they can.

3. The Japanese courts facilitate an easy buy by offering support to remove unruly landlords. I very much like the idea of buying through the courts.

4. There is a great deal of housing in Japan's depopulating rural areas. Japanese people will not commute as they love convenience....but would you buy a modern house for Y3mil just 50km from a major city? Use lateral thinking and you might even get a better buy close to an even bigger city like I did - yes Tokyo fringes for Y2.8mil ($US28,000).

Learn from our case studies on this blog!

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

Strategies for buying property close to stations

In my book on buying foreclosed property in Japan I raise a number of strategies for buying property in Japan. This story in the Japan Times highlights the application of one such strategy when buying property. The East Japan Railway Co is building a new railway station between Shinagawa and Tamachi stations. This type of 'infilling' will become more common, so its a good idea to identify the locations in which this is likely to occur and to buy property in those locations. The sites to look at are in areas where subways might be extended or new stations added. The principle guiding your decision-making will be:

1. Local minimum population density - look at neighbouring areas

2. Distance between train stations - look for anomalies

3. Explanation for anomalies - why is there no station there? Topographic anomaly so no settlement; perhaps a park, etc.

4. Growing population density - historical evidence that the area is growing in population. High rise developments, new stores like HokkaHokkaTai and McDonalds, etc are good signs to look for, but you can also look at Japan's very good population statistics. They offer you monthly changes in demographics.

5. Space for growth - stations need to be supported by near-station development. It is harder to develop a station if the railway company cannot build some type of shopping precinct to service it.

This approach can work on outer city lines or inner city lines. Of course, our intent is to be close, but not too close to such a development. We want to live close to amenities, the railway station. There is a big periphery around a likely site, and this raises your prospects of buying such a property as a foreclosure. You will find it hard to get such a property in Kanagawa, but not in Saitama. If we are going with this model, we are buying the foreclosed property to 'hold' as a rental property as we want to profit from anticipated future development. After a proposed new station is announced, you can expect property prices to double...as your property, which might be 7km from a railway station, might now be 3km away. Clearly we do best if we buy close to an existing line, but not too close.

This strategy can be applied to both land leases and freehold properties, as long as you are able to get an extension on your land lease. Read more about the nature of this development, as it will give you an idea of the dynamics of this approach.

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

Buying property in the USA

Comment by Bring the pain:

"There are plenty of countries offering 8% - do some research. Rest of the world in a bear market - obviously you are a Sepo and think the whole world (America) is in a bear market. American property is in a bear market because you have a retarded financial and banking system flow on effects include high unemployment, low GDP and unsustainable housing market due to dodgy loans. Bear markets are the best time to buy in a business cycle you moron. Having an asset depreciate in value means you lose money benny boy; get a grip on your economics. Again, the quality of housing in Japan is shocking. Who wants to live in a rabbit cage made out of plasterboard. Good luck getting 12% for a 1dk piece of rubish, good luck keeping the piece of rubish standing for more than 2 years. Rather buy a house in Swedan, houses made out of brick, stable banking system, and no earthquakes. If you want to lose money in Japan buy an investment property".

This is not a response to anything I wrote - but its worth answering. It is true that there are countries offering more than 8% yield. Unfortunately, they are outside of my area of interest because it does not make sense as an individual to have property in too many countries because I'd need to employ staff to manage them.

It is a gross generalisation to say that the US market is 'over-priced', as there are many areas in the USA where the affordability index is 2-3, compared to cities where it can be as high as 10x annual income. The trick then is to find those areas which offer a reasonable balance between lifestyle values and affordability, or reliable rental income and adequate yield, if that is important. Good online marketing can make the difference as well.

It is true that Japanese properties do depreciate rapidly; but that's why you buy property which is old, say 10-12 years old, thus 60% depreciated, and its more than offset by a 12-13% yield. This is most particularly the case in Japan where you can get a local loan and the ability to leverage your investment. The reality is that many people want to live in Japan, and for good reason. Personally, I did not by there for the yield, I bought for the lifestyle. But I was happy to help my ex-Japanese GF get a property from which she gets a 13% yield - its paid off now.

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

Living and working abroad

There are obstacles to living abroad. But you know, its not as hard as you might think to live and work abroad if you are able to develop relationships in these countries or find forms of work that suit you. In my 'wonderings' I have come across people who find work abroad by doing different things. Consider the following:

1. Selling: I write books about buying property. Such book publishing allow me to live anywhere in the world because my store front is online.

2. Consulting is another activity that allows you to work anywhere in the world if you deal with your clients online.

3. Strategic career opportunities: There are certain jobs like doctors, nurses and teachers who are in strong demand around the world if you have decent qualifications.

4. Service jobs like teaching English, builders, trades jobs and tattoo artistry are also jobs that you can find if you travel. Generally though in these cases you need to tap into the informal economy, but consider this: In a large city like Tokyo, you can be sure there is a need for computer support services for all the English expatriates living there, because there are thousands there looking for a good deal who are getting ripped off because they don't speak Japanese, or have support. In such cases, forums offer support for most, but forums only offer limited support.

Different countries have different rules for staying in the country. i.e. Consider that the Philippines probably has the most liberal immigration laws. You can stay there 18 months before having to leave the country, but you pay around $30/month to extend your visa. Other than that, they care less what you do. In Japan, its a 90-day tourist visa, and hard otherwise to get a business or working visa unless you are sponsored. Having said that, you can fly to China or Korea every 90 days (3mths) if that suits you, or you can commute from another place and just stay the 90 days in gaijin houses (i.e. Short stay accommodation).

The intention of this strategy is to buy accommodation in different countries at the low-end of the market so that I can live a flexible and interesting life as a tourist. This is why a $28,000 dormitory in Japan appeals, with a $300/year rates bill, a $US55,000 house in a depopulating NZ regional city, rates a little pricey at $1700/year, or you can go a house in much of the USA for $80-120K. We also have a place and land in the Philippines.

This is truly a period of great flexibility thanks to technology. I would not equate this however with freedom. No country recognises your personal sovereignty, and no government functions on the basis of rationality as the standard of value. Under democratic tyranny of the 'populist' majority, we spread our assets widely. This is why grasslands are so prevalent. Their spores are basically blowing around the world. We like to travel light in a world of arbitrary government. Yes, that might sound a little tragic, but living a life of slavery to some over-priced, statutorily or artificially priced house is crazy. I don't own a house in Australia, my home country because with the average house costing 11.6x the average income in Sydney, I think I should be living in Japan, NZ or USA, where I can live in a decent place for 2-3 times earnings. Personally, I wish people would think so we can end this tyranny, but since we have a system of wealth extortion based on 'universal ignorance and passivity', I prefer to travel. If you are wondering where this ends up, it is either:

1. A life of repression - Japan is the model we are drifting towards - where you are all zombies entertained by mindless concrete, frivolities like alcohol, sex, etc.

2. A intellectual life - A form of meritocracy which does not yet exist, where economies grow at 16% per annum because they are not constrained by centralised government; which are not overtly materialistic because the people's intellectual sovereignty has been oppressed. In a world where ideas matter because there is a free market for them, as opposed to the statutorily regulated 'parliament' which has political parties act as gatekeepers. But you go on pretending you live in free countries because you are given some pretense of it. More on this matter at our politics blog.

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

Japan - why rent property when you could buy?

Just a recommendation for anyone who thinks they will be living a long time in Japan; whether because:

1. They have a good job

2. They love the place

3. They are married to, or intend to marry a Japanese partner

You might want to consider saving yourself a great deal of rent expense by buying a home. Google 'buying foreclosed property in Japan" for more info, but some basic advice:

1. The Japanese prefectural law courts are tendering the sale of discounted properties way below market prices

2. The yields on Japanese property can be so high that renting is crazy. For instance, I paid just Y2.8mil for a 5br dormitory on 400m2 of land at Hanno, west of Tokyo. Its just 1hour from Ikebukuro, and I always get a seat on the train (Y420). There are better properties for less in depopulated rural areas.

3. Buy a house & land in suburbs to avoid apartment management fees, which are usually a rip-off.

4. Buy an old house with land lease if you insist upon living in the central city areas because the land rent can be extraordinarily low.

5. If you intend to stay more than 4 years in Japan, it would make more sense to buy there; particularly if you are earning yen, as all the major currencies are being debased.

The appeal of foreclosed property is that its a huge market; the Japanese investor is generally ignorant and risk-averse. The educated elite in Japan are more interested in office and residential complexes, not in managing houses, so you are really competing against real estate agents and home handymen who have limited resources.

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

The morality of buying foreclosed property

Question: "I'm interested in buying foreclosed property, but isn't it making money out of someone else's misfortune".

I don't regard buying foreclosed property as making money from others misfortune; that is what governments do. They create the recessions and structural imbalances through their monopoly over the use of coercion. A power they use to distort rather than to protect. It is not the responsibility of a buyer to protect the interests of the seller. If the seller thought they were going to get a better price, they would not sell. If they subjugated their rights to sell their property in case of default, then they made inadequate provisions to protect themselves, nor to understand the market into which they bought. If you buy property from a distressed seller, and encounter some angst from them, it would be nice to be able to communicate your empathy to them. Aside from that, you can only regale them of the hazard of government arbitrary power. They should direct their anger towards their nearest federal government. Market participants merely act within the law, the problem is 'arbitrary law' created by governments which distort markets and in the process place participants in a position of unnecessary vulnerability.

If you want to know more on the flaws of government; we do a great deal of writing on that issue on our politics blog. Nope, I'm not a conservative or a liberal; though I understand your confusion. That's how people lose money on property.

It is true that the Japanese system of selling favours the buyer in several respect, but again that is because of government, or silly Japanese suspicions about yakuza. The reality is that many foreclosed properties sell close to market price in the inner city areas. In the rural areas, they sell at huge discounts because of embarrassment and depopulation. Should buyers stop buying in these areas? No, that would reduce the dollar price recovered, and the banks would probably benefit anyway. In any case, its a market, which entails buyers and sellers taking advantage, or so they think, at the expense of others. There is a greater issue of responsibility here.

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

House for rent in Shimomaruko, Ota-ku, Tokyo

This place is currently not available....currently rented.

I am doing a favour for a guy who purchased my Japan Foreclosed Property report. He has purchased a foreclosed property and wants to rent it out for Y115,000 per month. It is a 2-storey, 2br house in Shimomaruko, Ota-ku, Tokyo. It is partly furnished, with a living room, kitchen, laundry space, bathroom, 2 restrooms and a big balcony facing south. There is a white leather couch, a bed, chairs, chests, a high-end fridge, washing mashine and dryer. The house is located between Shimomaruko Station and the Tamagawa river. Along the nearby rivers, you can engage readily in relaxation and exercise, i.e. running, cycling or play tennis.

The house is close to various stations:

1. Five minutes walk to Shimomaruko Station

2. Sibuya Sta. in 21 minutes

3. Shinagawa Sta. in 21 minutes

4. Tokyo Sta. in 31 minutes

The house is currently under a minor reform, but will surely will be ready by May 2011.

Pets are OK. If you are interested in renting this house in Tokyo you can contact me through my website and I will refer you to the landlord. Anyone interested in buying foreclosed property in Tokyo might be particularly interested in this opportunity for two reasons:

1. This is a foreclosed property so you can get a sense of the commercial returns on renting foreclosed property

2. This landlord would probably be happy to give you advice (aside from the book I am selling) on how to buy foreclosed property in Japan...since he is the embodiment of the opportunities available.

3. Some buyers who have not lived in Japan might want to avail of this opportunity to rent before you buy. The house is well-located close to central Tokyo.

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

Feedback on our Japan Foreclosed Property ebook

Here is some feedback on our Japan Foreclosed Property eBook which I did not list sooner...

“I would be more than happy to help you out for your marketing. I just recently got start in the real estate investment business focused primarily in the USA and one of the question that I routinely ask myself is where do I want to own property? After spending 8 weeks this winter in Okinawa, Japan and absolutely loving it, I felt that a few justifiable business trips to Okinawa a year would be a great perk. So I have start the research process of starting a profitable real estate investment business in Japan, focusing initially in Okinawa”.

“I found your ebook being discussed and bashed on jref.com site which I stumbled upon through a Google search. Being familiar with some people just not understanding a good opportunity when they see it, I dismissed the naysayers and sought to purchase your book. I felt that it would be better to get the information in an organized format that trying to piece it together myself. If you have any information specific to keibai bukken in Okinawa I would love to hear it. Thank you and best of luck in all your endeavours”.

James Boydston

Boydston Enterprises

Okinawa is of course a long way from the Fuchushima nuclear reactor, but it does not escape the perils of tsunamis. This is where is better to be on the West Coast, or in the mountains. The mountains are less susceptible to earthquake damage.

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

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.

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

Equity markets and property opportunities in Japan

The Japanese equity market is offering a lot of promise according to the NY Times. See this article. Japan is a little more dependent on imported oil than other countries. Not a good thing when these is the prospect of a political crisis in the Middle East; and yet Japan's oil consumption per capita is far less than other Western nations, so overall this is not so significant.

Any chance of reform in Japan? Well, its looking less likely, but the market is still cheap. I think the property market looks far better because the government regulation is actually making opportunities, and its an otherwise less regulated market. The yields are high too. One of my favourite old stocks was KDDI. There was another setting up a Wimax network, but I think its since been acquired by KDDI.

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

Business opportunity for foreclosed properties

Many of you living in Japan might be looking for opportunities to stay there, development a business or build an investment portfolio. We have a suggestion for how you might do this. In the main cities of Japan there are a great many 'gaijin houses', i.e. Houses converted into share accommodation. Foreclosed properties subject to lease are perfect for this purpose because you buy the house, renegotiate the lease agreement, and you renovate the house, so its suitable for short term rentals.

Now, the appeal of this suggestion is that I can help you develop a website very cheaply using Filipino programmers who work for my partner. She managed 50 staff at a US call centre in the Philippines, and she is a great project manager. Her team have a range of skills for doing this; sadly no Japanese-speaking skills if you wanted to target this market. You could of course provide the content. The opportunity exists for a person to develop their own string of rental properties, or for some of you to team up. Either way, we are only interested in facilitating the opportunity. We are not business brokers or property agents. Here are examples of the quality of her work - my website and another for no more than $1000. She can set up online payment systems, databases, etc.

Gaijin properties rent on a weekly or monthly basis. Some have a better reputation than others. Clearly land leased foreclosed property are great properties for upgrade to rental properties for these purposes because:

1. They are down-market rentals

2. They are well-located properties

3. They are low-cost property entries - both in capital and (land) rental terms

4. They offer surprisingly good protection for renters. You might want to get free legal advise from your local prefectural office to ensure that the protections applying to tenants apply to business operators of land leases. I have no experience with those issues.

I was planning to do this years ago but I broke off from my Japanese GF, so those plans collapsed. If you are interested in sharing a website with multiple property owners, we can set up a website 'brand' for all concerned, and just collect a fee. Either way, we are interested in helping people get into business, make great investment decisions.

Land leased houses can be bought for as little as $10,000. The question is whether your property has sufficient appeal to foreigners to rent on a medium term basis. Clearly foreigners love cheap accommodation in nice places, even if it is rural, and if its in a depopulation zone, it matters little for Japanese people who cannot find work there. So this is a good opportunity if you find the right property, in the right 'depopulation' zone, which foreigners can use their Japan (East) Rail Pass to visit. That is the packaging you can do. I think the Japanese hinterland has a lot of promise for tourism, whether its specialist tour groups like hikers, skiers, kayakers, etc. You can offer greater appeal of course if you lease out such sports equipment. It might be as easy as finding second hand bikes at a recycling depot. That is what I did. Damned good bike too.

We offer such suggestions in our Japan Foreclosed Guide. It is a very big market.

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

Renovating a foreclosed home in Kyoto, Japan

It seems there are a few buyers of the Japan Foreclosed Report who are prepared to come out and describe how they are doing it. Understandably not everyone wants to speak. Having said that, the market is huge. We need to remember that Japan did not have an unemployment problem until fairly recently, so unemployment is a potential source of 'fairly new' foreclosures. I think asset deflation would have been a bigger concern for the banks years ago as they sought to clean up their balance sheets. I see in the latest employment statistics that only 65% of new university graduates secured jobs last year - the lowest uptake in decades. We need also to remember the depopulation of rural Japan has resulted in the vacating of properties in those areas. With no tenants, they lie vacant, and are the first assets to be sold off by stressed buyers, who might have ‘over-encumbered’ themselves buying a more expensive 2nd home. i.e. Westerners are accustomed to renovating homes. Japanese people simply tend to build new ones. I don't know why. The old ones are probably not as structural sound, but they work ok by my estimate. It is not the land of financial literacy, so don't expect any of that.

The latest person to give us a description of his experiences buying foreclosed property is a New Zealander married to a Japanese national. He bought a foreclosed house & lot in Kyoto at auction last year. He spent 5 weeks renovating it, presumably whilst holidaying in Japan, since he lives in Auckland. He has placed the property up for auction. He has offered to provide more information, so I look forward to that. Meanwhile, some of his feedback on the Japan Foreclosed Guide ebook:

“The information you supplied was a good indicator of what to expect”.

“I plan to repeat this process this year and purchase a second property”.

"I agree with your opinion that there is great potential in this market which is more than I can say for NZ".

If you are interested in John’s experiences renovating his property, I suggest going to his Japan blog. I also describe my renovation insights in the book, but his were more extensive.

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

Strategy for profiting from leased property

In my last post I described the experiences of a Japanese and foreign national who bought a property on the southern edge of Tokyo. This was a particularly interesting transaction for several reasons:

1. It was a very cheap inner city property

2. It involved the purchase of a 2-storey home on land leasehold

There are a number of reasons why you ought to consider such a proposition. Normally, I would not be particularly interested in leasing land, but this is different...the terms are very good. There are a number of appealing elements:

1. If you are buying a new apartment, you are buying alot of building value, which is destined to depreciate a great deal over coming years. In the case of these buyers, they were paying a nominal Y500,000 (USD5,000) for the 3br house, which if they spent a little money might rent for Y125,000 a month, given its proximity to Tokyo City.

2. They are not paying a huge about for land. Now, owning land in Tokyo might be considered an appealing idea because whilst Japan's population is falling, Tokyo's is increasing, and some areas more than others. The problem as I see it is that those new residences are moving into new high rise apartments, and there is plenty of room for more. Future buildings might even be cheaper to build due to the development of new high strength TiV-based steels. This could greatly reduce the materials needed to construct a home. The old homes will not have the features of the new homes, however given the steep discount in the price of the older homes, its worth considering the 'low-cost' property option. Its a different issue of course if money is no object. You can expect those new 'high priced' homes to depreciate significantly in value.

3. Saving money on capital allows you to place the bulk of your capital in better performing asset classes like gold stocks - and if you are an Australian or New Zealander, than there are few better places than my recommended explorers. ASX gold stocks with upside. Canada, the USA and Britain of course have similar opportunities. Some years ago I projected a gold price of $2400/oz. We are still some way off based on a DowJones/gold ratio of 5.

One of course has to remember that its good to use others money...but remember that does not always hold. Its been good for the last 15 years because of low interest rates. A pertinent issue is your capacity to access those low-interest loans in Japan. This might not be as easy for foreigners. Nevertheless, I would caution against the appeal of these loans because Japan will need to finance its deficits in future, so they are looking at a higher interest rate environment as their savings rate falls and their debts rise.

Today Japan has a public debt of 200% of GDP, requiring a combination of taxation, national income growth (immigration???) and monetary debasement to repay it. That is going to cause a rush into tangible assets like property or a shift of money offshore. I would suggest Japanese accustomed to foreign markets will buy assets in places like Australia, NZ, Thailand and the Philippines. I am surrounded by Japanese retirees as I speak in this apartment complex in Queenstown, NZ.

For most people however, they will more realistically stay in Japan to be close to family. Most will buy property given the high yields. But they have to buy the right property. Apartments are not going to appreciate in value....least of all the over-priced premium property off-the-plan. You are buying a box in the sky. If you are getting a box, better an old box on ground floor, and 30minutes from the city centre. Why?

You might pay as little as Y3,000 for a land lease, having paid just Y6mil for the house. Even if you have to pay Y5,000 per month under a new lease, its a far better deal than sinking money into a high priced modern apartment which can only depreciate. Given the prospects of inflation in coming years, and I think Japan will be as bad, if not worse than the USA and Europe, you will want to hold property. The reason is that Japanese property is not over-valued. It is very cheap, so higher interest rates are not going to compel people to sell. In fact cash savings will be rush into property. What are they waiting for? I have no idea.

The problem is Japanese are buying the wrong type of property. They ought to be buying fringe properties in lifestyle locations, or leaseholds in the inner city. There are issues to consider:

1. The lease term - you want to negotiate with the owner before you buy at foreclosed property tender. Nice to do before....but in fact buyers have rights. Since there is leasehold owing, and the property rights of leasees is solid, there is a good chance to extend the lease....albeit at higher rates. Short of a revolution, this situation is unlikely to be resolved by legislation I think. In any case, the terms are pretty sound.

2. The cheapness of the lease payments - it is staggering that they are as little as Y5,000 and fixed for 20 years. After 20 years of inflation without adjustment (remember they might not expect inflation after 15 years with none), that is quite a financial benefit

3. Your use of the property - What do you do with a leased property if you decide to move to the USA? You have several options: (a) You can sell the land, which might be difficult as people like to own the underlying land in Japan (b) You can rent it out, but that might be more difficult if the house is 46-55 years old. (c) You can negotiate to sell back the lease...the owner might ask you to pay reparations, i.e. money for cancelling the agreement, or more likely to demolish the old house that no one wants to live in. (d) You can turn the place into a 'gaijin house' for people who care little about the quality of the place where they live. This at least requires a strategic long term plan.

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

Experiences of Tokyo foreclosed property with a land lease)

If you happen to buy a property report from us, we are pleased. What we love even more is when customers take the time to send us some feedback on their success or failures. One of my customers bought our Philippines report, so I was pleased to have the opportunity to ask him about his progress buying a foreclosed property in Japan.

They bought an old house near Oota station, in Tokyo-ward. He bought this house 18 months ago (Jun 2009) for Y6 million ($US60,000); Y5.5 million being the nominal value of the land lease and Y0.5 million for the old house. The house is 75m2 in floor area, on two floors, and occupying 40m2 of land. This close to the city residential lots are significantly smaller because land values are far higher. They bought the property with a 20-year land lease due to expire in just 5 years at a fixed lease fee of Y3,000 per month. They were able to extend the lease for a further 20 years at a fixed lease rate of Y4800/month. i.e. Just 5% of the rental cost for such a property. This is a good deal for 2 reasons:

1. The lease rate looks like a significant mark-up but it was fixed for the last 20 years

2. The new lease rate of Y4800/month is fixed for 20 years, which is very attractive when you consider the prospects of inflation in Japan. People are so accustomed to low inflation, they have forgotten how savage inflation can be.

3. Rather than absorb a Y200-300,000 lease renegotiation/contracting fee, they agreed to incorporate the fee in the monthly lease rate.

Buyer: "We would have preferred to own the land, of course, but houses (including land) are rare in this location and expensive in the foreclosed market. The Japanese consider land ownership as very important. So competing for house and land packages in good areas is not an appealing deal".

"The lease rates [for land] are cheap and the rights of the the leasee are very strong. We could destroy and rebuild, and rent the house without asking for permission".

The auction required a minimum bid of Y5.5 million, and they won with a bid of Y6.0mil. They were the only bidder. They believe they would be able to rent the house for Y125,000/month, at a nominal yield of 25%. The place did need some minor improvements, like fixing the drains and repairing wallpaper. Some of the floor boards are not properly leveled, and there is a ventilation problem as a result of a neighbour's extension to their house. These issues would cost Y1.2 million to fix. This would reduce the effective yield to 20.8%, however they are happy to live there in the interim. In the West, properties so close to the city will sell with a yield of 2-5%, and yet in Japan, they were able to buy a place with a yield of 20.8%. This will mean rental income (or 'rent replacement') will pay the house off in 4-5 years. The house is 46 years old, and was valued at just Y0.5 million ($5,000) in the auction documentation. Of course many Japanese are prepared to pay Y30-35 million ($350,000) to build/buy a new home. Such is the premium paid for new homes with land. Of course they offer a nicer, modern ambiance, but many people spend their day outside, so they might question this price premium given its value depreciates. Some would prefer to pay just $5,000 for a house. The issue is whether the house is livable for not just the five years (until to pay off the house cost), but for the lease period, as the owner could require you to destroy the house (Y2mil perhaps in the city) at the end of the lease period. The lease period is therefore very important. These buyers were able to extend for 20 years at the new lease rate. You need to decide whether you are there for the long term. Does the lease term justify building a new house? Or will you be stuck in the short term potentially with a house you don't want to live in, that is too old to rent or which you cannot afford or justify fixing up. The lease period and your capital are the critical issues, however your relationship/visa status and language skills might also be issues. Professional people are much more likely to speak English. I met a Building Project Engineer who spoke English in my local pub.

They are 4.3km from Tamagawa Station, which is a 25 minute train ride from Shinjuku Station in central Tokyo. Their house is just 400m from a smaller train station, as well as a small supermarket, and 100m from a convenience store. They have a large open area along the river several blocks away, suitable for riding a bike or jogging. There are also tennis courts and baseball facilities there. This buyer seems very happy with his purchase and is now looking at the Philippines.

The house does not come with any car space, however they can be leased if required close to home. Many Japanese living in the inner city go without cars for this reason.

Small old houses on small lots offer economy buying. They looked at buying house and land for a nominal price of Y10mil, but after bidding it sold for Y28 million because of the competition. The moral of this story is that in Japan, its sensible to simply do something different from everyone else. There are many Japanese people who are prepared to pay too much because they are not commercially astute.

Buyer: "Japanese people are stuck to what they think is the proper normal lifestyle; graduating university, finding a girl, buying a new home. They don't consider alternatives. So its easy for people who have a different view of things".

And his feedback on the Japan Foreclosed Property report:

"I highly respect and appreciate your [the author's] lifestyle. I am impressed by the amount and accuracy of your research about real estate and foreclosed property".

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

Yamanashi foreclosed properties, Japan

There is a 2LDK apartment in Kofu, Yamanashi Prefecture for a nominal Y1.008 million. The apartment is on the 3rd floor, and its 51m2 in area. You can secure the apartment for just Y252,000. The building is 22 years old, and is located 2.16km north of Kokubo Station. See the http://bit.sikkou.jp website for more details.

This is the only cheap property I could find in Kofu. Mind you, I would not buy an apartment. Better to buy house & land.

NZ Property Guide Philippine Real Estate Guide Japan Foreclosed Guide

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