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Everything you need to know is included in our Japan Property Pack
Are you thinking of investing in property in the land of the Rising Sun? Are you unsure if it's better to buy now or wait until next year?
Market timing is a subject where opinions vary among individuals. The Japanese chef you know may advise you that it's currently a good time to buy property, but your friend living in Osaka suggests waiting for a couple more months.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in Japan, we prioritize evidence-based work, relying on reliable data and statistics rather than personal opinions or rumors.
We have carefully gathered and analyzed official reports and government website statistics. Using this information, we have created a reliable database. Here's what we found that can help you decide whether it's a good time to buy real estate in Japan.
Enjoy the article!
How is the property market in Japan these days?
Japan remains, today, a very stable country
Positive
If you want to invest in real estate, prioritize stability as it is key for long-term growth and profitability. It is an information you need as a foreigner who might buy a property in Japan.
You most likely already know that Japan is widely known for its remarkable stability. The last Fragile State Index reported for this country is 30.2, which is an impressive number.
Japan remains a very stable country today due to its strong and resilient economy, characterized by advanced technology, a robust manufacturing sector, and a high level of innovation, which collectively contribute to consistent economic performance. Additionally, Japan's stable political environment, underpinned by a well-established democratic system and effective governance, ensures social cohesion and effective policy implementation.
Stability check done. Now, it's time to review the economic forecast.
Japan will face challenges in its growth
Neutral
Second thing to do before buying a property: make sure the country's economy is thriving.
As projected by the IMF, Japan will end 2024 with a growth rate of 0.9%, which is not much. If we take 2025, we're talking 1%.
Unfortunately, an explosive growth is not on the horizon since Japan's economy is expected to increase by 4.3% during the next 5 years, resulting in an average GDP growth rate of 0.9%.
A minimal growth rate in Japan means that the economy is not expanding much, which can lead to stagnant property values and limited potential for price appreciation. This makes it challenging for investors because they might not see significant returns on their property investments over time.
However, GDP growth is not the only metric to look at.
Japanese business owners are growing more confident in the economy
Positive
While the GDP forecast is an informative metric, it may not fully reflect the local sentiment as it is based on external projections. Thankfully, in Japan there is an official metric that is frequently updated. This doesn't apply to every country, so we're in luck.
Surveys and assessments of business leaders form the basis for the Business Consumer Index (BCI), a metric that measures their confidence in the present and future economic conditions.
According to the Bank of Japan's data, the latest Business Confidence Index value is 13 for Japan. It's a rather good score.
If we look at the data, we can see that the trend is showing an upward progression: the BCI score, 12 months ago, registered at 9.
A Business Confidence Index (BCI) score at a sustainable level should not be automatically interpreted as a cause for alarm. It can simply reflect a temporary period of uncertainty or caution among businesses, which is a natural part of economic cycles. In fact, history has shown that periods of sustainable BCI scores have often been followed by significant periods of growth, as businesses adapt, invest, and capitalize on new opportunities.
Property prices in Japan transition from stability to appreciation
Positive
Japan's home prices have increased by 21.4% in 5 years according to Ministry of Land, Infrastructure, Transport and Tourism, Japan.
It means that if you had bought a traditional ryokan in Kyoto for $1,000,000 five years ago, then it would now be worth around $1,214,000.
Recently, there has been a noticeable shift in the property market as prices are transitioning from a period of stability to a phase of appreciation
Certainly, it's a positive indication if you are considering purchasing a property in Israel. The market is dynamic and showing a growing momentum. However, you can still wait a bit and expect a market correction in order to secure a more favorable price for your investment.
You can find a more detailed analysis of the real estate prices in our property pack for Japan.
Everything you need to know is included in our Japan Property Pack
Japan's population is declining and getting poorer
Negative
Before you purchase real estate, take a moment to consider population growth and GDP per capita, because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Japan, the average GDP per capita has changed by -0.3% over the last 5 years. It's an alarming number.
Rental yields are not really interesting in Japan
Neutral
We will now consider the rental yields in detail.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Japan is purchased for ¥100,000,000 and generates ¥4,000,000 in annual rental income, the rental yield would be 4%.
According to Numbeo, rental properties in Japan offer gross rental yields ranging from 1.1% and 3.8%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Japan.
It's very minimal.
Everything you need to know is included in our Japan Property Pack
In Japan, inflation is expected to be minimal
Neutral
Inflation is when prices for things you buy keep going up.
It's when your favorite bowl of ramen costs 900 yen instead of 800 yen a couple of years ago.
If you're about to invest in a property, high inflation can benefit you:
- property values tend to increase over time, leading to potential capital appreciation
- inflation can result in higher rental rates, increasing cash flow from the property
- inflation reduces the real value of debt, making mortgage payments more affordable
- real estate can act as a hedge against inflation, preserving the value of the investment
- diversifying into real estate provides stability during inflationary periods
- tax advantages, like depreciation deductions, can help offset the impact of inflation
In accordance with IMF projections, the inflation rate in Japan will increase by 1.0% over the next 5 years, with an average annual increase of 0.2%.
This data is telling us that Japan will likely experience almost no inflation. If you buy a property now, you may experience lower appreciation potential and reduced returns on investment.
Is it a good time to buy real estate in Japan then?
Now it's time to draw our conclusions.
Japan is known for its stability, both politically and economically, which makes it an attractive place for property investment. The country's consistent governance and reliable infrastructure provide a sense of security for investors. While the economy isn't expected to experience explosive growth, this stability can be a double-edged sword. On one hand, it means that the property market is less likely to experience sudden downturns, making it a safer bet for those looking to invest in real estate.
With Japan's economy projected to grow at an average rate of 0.9% over the next five years, property values are likely to remain stable. This minimal growth rate suggests that the economy isn't expanding rapidly, which can lead to stagnant property values. For investors, this means that while they might not see significant returns in the short term, they also won't face the volatility seen in more rapidly changing markets. This stability can be appealing for those who prefer a more predictable investment environment.
Interestingly, property prices in Japan are transitioning from stability to appreciation. This shift could present a unique opportunity for buyers in 2025. As the market begins to appreciate, those who invest now might benefit from increased property values in the future. This potential for appreciation, combined with the country's overall stability, makes Japan an intriguing option for property investment.
Japan's population is declining and becoming poorer, which might seem like a deterrent for property investment. However, this demographic shift can also lead to opportunities in the rental market. According to Numbeo, rental properties in Japan offer gross rental yields ranging from 1.1% to 3.8%. Additionally, with minimal inflation expected, the cost of maintaining a property is likely to remain stable, making it easier for investors to manage their investments over time.
We genuinely hope this article has provided you with valuable insights and information.. If you need to know more, you can check our our pack of documents related to the real estate market in Japan.
-Will real estate prices go up in Japan?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.