The reason that Japanese property is 'soooo cheap' goes way beyond the issues of rural depopulation and foreclosures. Certainly there is negative population growth outside the major cities, but you could not accuse Japanese banks of engaging in a 'fire sale'. This process has gone on for over a decade, and there are still alot of properties. It seems they have left the residential properties to the end in the interests of social harmony.
Really the more important reason the property is cheap is cultural. I see this impacting in 2 respects:
1. Opportunity: Japanese salarymen don't have the opportunity to go tracking down properties and still less time to enjoy them. They have 2 significant weeklong holidays a year, and they are structured around visiting their traditional family home. Weekends present an opportunity but transport costs for Japanese people is expensive. They can't get the Japan Rail pass, and few of them have the flexibility to work from home.
2. Priorities: Japanese people place a greater sense of value on obligation to others, first employer, then family, so they are inclined to work very hard for their sake. That's HARD, but not SMART. There is a pride is suffrage in this country. "I am great because I suffered so hard for my country". An example is an acquaintenance of mine called 'Sugi'. He is the son of the owner of a construction company. The family spent $400K building a VERY nice holiday house in the mountains outside Tokyo. But they never use it. They probably keep it only as a matter of pride because they built it, and also because they can afford it. But they go there just twice a year and he lives just half an hour away from it. Its a lovely mountain retreat, just a walk away from a restaurant with fantastic scenic views over Chichibu. The place was designed as a place to entertain. It has accommodation for guests, a sweeping verandah looking over the mountains, a bar room, a pool room. A legacy of the 1980s - but its never used.
Instead he spends his time working 10 hours a day, 6 days a week, he is single and he spends his evenings alone for the most part drinking whiskey. Occasionally he dates a gorgeous girl because he's loaded, but maybe they reflect on him and think he's too pathetic to be worth it. He eats bar meals all the time because he has no mother to take care of him. Probably a candidate for suicide. But he'd probably be knocked over by salarymen rushing to catch a train on his way to the station - except that he is too well-heeled to catch a train, and its 5AM and they are too polite to knock you over. But trust me I've seen them run at 5AM in the morning to get to the office....as I was coming back from an all-nighter in Roppongi.
That's your market for property in Japan. If only he could be interested. So he sits on cash. Falling property prices has greatly escalated the disparity in wealth between the rich and poor in Japan. Sugi is the Vice President of the company, but his wealth is very much a legacy of his father's generation.
3. Retirees are not interested either: You might think these retirees are a market for foreclosed property, but a lot of them are loaded too, or at least comfortable, and they are so risk-averse they dont want to 'gamble' on a foreclosed property, as if buying through a court could pose any unquantifiable risk. Anyway, they want to live in the 'big city' because that is where their family is, and that's where the services they are accustomed to are located.
So it goes without saying in a large market like Japan, there is a huge market opportunity for foreigners with different lifestyles, different priorities, different risk sensitivities, with a hankering for an adventure or a lifestyle change to buy what most Japanese people consider unreachable because they burden themselves with responsibilities to others. So for those that dont take pride in suffering - read on!
---------------------------------------------Really the more important reason the property is cheap is cultural. I see this impacting in 2 respects:
1. Opportunity: Japanese salarymen don't have the opportunity to go tracking down properties and still less time to enjoy them. They have 2 significant weeklong holidays a year, and they are structured around visiting their traditional family home. Weekends present an opportunity but transport costs for Japanese people is expensive. They can't get the Japan Rail pass, and few of them have the flexibility to work from home.
2. Priorities: Japanese people place a greater sense of value on obligation to others, first employer, then family, so they are inclined to work very hard for their sake. That's HARD, but not SMART. There is a pride is suffrage in this country. "I am great because I suffered so hard for my country". An example is an acquaintenance of mine called 'Sugi'. He is the son of the owner of a construction company. The family spent $400K building a VERY nice holiday house in the mountains outside Tokyo. But they never use it. They probably keep it only as a matter of pride because they built it, and also because they can afford it. But they go there just twice a year and he lives just half an hour away from it. Its a lovely mountain retreat, just a walk away from a restaurant with fantastic scenic views over Chichibu. The place was designed as a place to entertain. It has accommodation for guests, a sweeping verandah looking over the mountains, a bar room, a pool room. A legacy of the 1980s - but its never used.
Instead he spends his time working 10 hours a day, 6 days a week, he is single and he spends his evenings alone for the most part drinking whiskey. Occasionally he dates a gorgeous girl because he's loaded, but maybe they reflect on him and think he's too pathetic to be worth it. He eats bar meals all the time because he has no mother to take care of him. Probably a candidate for suicide. But he'd probably be knocked over by salarymen rushing to catch a train on his way to the station - except that he is too well-heeled to catch a train, and its 5AM and they are too polite to knock you over. But trust me I've seen them run at 5AM in the morning to get to the office....as I was coming back from an all-nighter in Roppongi.
That's your market for property in Japan. If only he could be interested. So he sits on cash. Falling property prices has greatly escalated the disparity in wealth between the rich and poor in Japan. Sugi is the Vice President of the company, but his wealth is very much a legacy of his father's generation.
3. Retirees are not interested either: You might think these retirees are a market for foreclosed property, but a lot of them are loaded too, or at least comfortable, and they are so risk-averse they dont want to 'gamble' on a foreclosed property, as if buying through a court could pose any unquantifiable risk. Anyway, they want to live in the 'big city' because that is where their family is, and that's where the services they are accustomed to are located.
So it goes without saying in a large market like Japan, there is a huge market opportunity for foreigners with different lifestyles, different priorities, different risk sensitivities, with a hankering for an adventure or a lifestyle change to buy what most Japanese people consider unreachable because they burden themselves with responsibilities to others. So for those that dont take pride in suffering - read on!
Andrew Sheldon www.sheldonthinks.com
