Winning Strategies for Japan Real Estate Investment

As part of our continuing series on the best books about real estate in Japan, we are happy to introduce Winning Strategies for Japan Real Estate Investment (2017) – an excellent collection of resources for anyone interested in investing here in Japan.

This book is marked by having local experts from across the country to detail the actual state of things about Japan’s real estate. In depth, yet easy to understand, it enables readers to get a sense of Japan’s economy and real estate market from multiple perspectives.
— Fong Suet Sum (for the forward)

This book was produced by Cheung Neo Wing Tat, a Hong Kong entrepreneur and co-founder of an overseas mortgage matching company called PropCap. In Winning Strategies for Japan Real Estate Investment, Cheung brings together some excellent thinking from a team of Japanese real estate professionals.

The guest authors of this book are all based in Japan. As insiders of the country’s real estate industry, they have intimate knowledge of investment, economy, taxation, law, and property management that is simply unparalleled.
— Cheung Neo Wing Tat

Below we provide a complete review of Winning Strategies for Japan Real Estate Investment, sampling liberally from the notes we took as we studied the various chapters. Having read the book cover to cover, we recommend it to anyone that would like to add to their knowledge of Japanese real estate.

Overview

Winning Strategies for Japan Real Estate Investment begins with three separate forwards setting up the book. From there, a series of 12 chapters proceeds on a range of topics including; “Is Now The Best Time To Invest in Japan Real Estate?,” “The Key to Success in Real Estate Investment,” “Notes on Property Management for Foreign Investors,” “Taxation in Japan,” “Real Estate Registrations in Japan,” and more. There are also specific chapters that focus on Fukuoka, Osaka, and Tokyo.

The opening chapter is a review of Japan’s real estate market written by Cheung. Each subsequent section is written by a representative of a Japanese real estate company, functioning as an introduction to each of the companies that contributed a chapter. The format of the book is an unusual 8 x 12 in (20 x 30 cm) softcover book, like an oversized paperback.

The material is straightforward, easy to read, and the quality of the ideas is often excellent.

Future of Real Estate in Japan

Even though Winning Strategies was released in 2017, as we read through the chapters, so much of the information felt extremely relevant to what we see in our transactions with real estate clients today.

I’m absolutely positive and optimistic about the outlook for Japan’s economy in real estate. This is the prime time to invest in Japan’s property.
— Cheung Neo Wing Tat

That line is from the opening chapter. In that section, Cheung quotes a 2017 Bloomberg headline saying, “Japan is back.” We can compare that to recent Bloomberg headlines from 2024; “Tokyo Apartment Prices Reach Record for Third Straight Year.” General positive trends that began several years ago are true today, and may be accelerating.

We know this from our own research. We recently wrote that land prices in Hokkaido (and in many major markets in Japan) are up; real estate prices in Japan are appreciating for the first time in 30 years.

Cheung was right. It does seem as if the “Lost Decades” are over, and that real estate investors in Japan have many reasons to think the future is promising.

Asian Real Estate Investors in Japan

Winning Strategies is written mostly by Japanese real estate professionals, and contains lessons for anyone that wants to be a more informed buyer or real estate investor in Japan. Cheung’s perspective as a Hong Kong native adds focus to the story of Asians buying real estate in Japan.

Japan’s real estate caught wide media attention in Hong Kong in May 2013. Low purchase price, high rental return – Japan’s properties came as a thrilling surprise, captivating Hong Kong people in a flash.
— Cheung Neo Wing Tat

Taiwanese fall in love with Japanese properties right away given their excellent qualities. Slowly, the Singaporeans and Hong Kongers have also started scooping up Japanese realty assets since last year.
— Cheung Neo Wing Tat

Working with clients here in Hokkaido, we see these trends from 2013 continuing into the present day. Asian buyers are purchasing property in Sapporo, Niseko, Otaru and other parts of Hokkaido. Many of our clients are from neighboring Asian countries.

Here is another comment from one of the case studies in the book:

In Hong Kong, properties have low rental returns in general; investors are more interested in the upside of the property values. While in Japan property value is unlikely to rise rapidly given the country’s weak economy. However, their higher rental yields do make them a good option for investors seeking stable investment.
— Investor: Richard Lee, from a case study in Winning Strategies

While the property values in cities like Sapporo (and even Tokyo) actually are rising, the quote from the Hong Kong investor helps explain why Asian investors see the potential for profit in Japan property.

Information in English About Real Estate in Japan

Winning Strategies is significant as another resource that, by providing more information in English, helps bridge the language barrier for foreigners buying property in Japan.

Language is the first stumbling block to buying property in Japan, as all legal documents are in Japanese. Although there are more than 900,000 agents holding real estate notary licenses in Japan, few can speak English or Chinese… Unfortunately, information on Japanese real estate has not been well circulated in Hong Kong because of the language barrier. This feeds into the skepticism of investing in it.
— Cheung Neo Wing Tat

Real estate transactions in Japan become more accessible to foreigners as those buyers can find the information they need, in a language they can understand.

It is a curious truth that a lot of foreign buyers of real estate in Japan are Asian, and as they do not speak Japanese, the deals are conducted in English. Books written in English about Japanese real estate help buyers from China, Hong Kong, Taiwan, Singapore, Malaysia, and other Asian countries to do more business here in Japan.

Yield from Rental Properties in Japan

While there is information in Winning Strategies that can serve residential property buyers in Sapporo, the book is primarily focused on investors. As such, there are many notes for foreigners concerning yield and rent from Japanese properties:

Foreign investors now target Japan real estate as an investment vehicle because its rental yield reaches up to seven to ten percent.
— Dr Eddy Li Sau Hung

Yield per annum is an important yardstick for property investment. The newly built properties of Tokyo Metropolis generate a yield of four to five percent, while the older ones offer five to seven percent – higher than those in New York, Los Angeles, and other cities.
— Takebayashi Tomohiro, First RE Company

At this point, I guess you have already figured that real estate providing high yields are usually associated with high vacancy, and vice versa. Are there properties with low vacancy rate and high yields at the same time? The answer is: yes!
— Hiraga Mitsunori, Lighthome

While there are specific estimates of rental yields throughout the book, this note above from Hiraga helps teach investors about profit versus risk in Japanese real estate: High-demand properties are easier to rent, but cost more, driving down the effective yield. Investors that can buy in less prime areas and can negotiate better purchase prices, can expect higher rates of return (assuming they can keep those units rented).

Exit Strategy for Real Estate in Japan

When you buy property, though, you always have to think about your exit strategy… That’s also my philosophy as an investor. Because property investment involves huge amounts of money, the first thing to assess is the risk, not the return.
— Yamamoto, from our review of The Savvy Foreign Investor’s Guide to Japanese Properties

This quote above is from a review we wrote of Yamamoto’s book, but is a good note for real estate investors in any country.

“Deliberate strategically on your exit plan as early as making the purchase.
— Numada Makiyo and Ohno Tomoko, Ace Corporation

As for the timing of when to sell, the notes in Winning Strategies helped us to better understand the Japanese market. Tax policy may be part of how real estate investors in Japan determine when to sell:

If a property is held personally for less than five years, a value added tax (VAT) of 30 percent will be levied upon the sale of the holding. If it exceeds five years, that rate will be lowered to 15 percent. As a result, most investors tend to hold their properties in Japan for more than five years.
— Cheung Neo Wing Tat

Seeing these same themes expressed by multiple Japanese real estate experts helps reinforce the importance of an exit strategy.

Investing in Condominiums in Japan

The professionals that contribute their knowledge to Winning Strategies do not always agree, and the contrasting range of ideas can give an investor an education that includes multiple sides of an issue.

As an example, compare these two conflicting statements about investing in condominiums in Japan:

There are condominiums offering nominal yields that exceeded 15 percent… One has to be aware that although the nominal yield for condominiums in Fukuoka is high, monthly fees for management and maintenance are high as well. In other words, the actual yield is indeed very low.
— Shojima Yoichiro, Pros Corporation

In that example Shojima may seem to be discouraging the ideas of investing in condos in Japan.

We have clients that have bought condominiums in Sapporo with similar experiences: The gross income from a condominium rental may be attractive, but after monthly fees, that yield is reduced, and profit is more modest.

However, here is a perspective that suggests that for overseas investors in real estate in Japan, condominiums can be a good place to start:

Compared to houses, commercial units, and single-block properties, condominiums sold as single-units are not only cheaper, but also easier to manage… Condominiums are usually looked after by management companies, which ensure the common corridor and entrance are clean, and the lifts are well maintained.
— Takebayashi Tomohiro, First RE Company

Monthly association and management fees do eat into profits from rent. However, it is also true that buildings with shared ownership can be easier to manage for foreign owners, as common areas and the exterior are taken care of by owners’ association. Those management fees may reduce yield, but also reduce the personal responsibility that owners have to maintain the property.

Why Use Property Management Companies in Japan?

There is some very good information for foreign property owners in Japan in a chapter called “On Management: Notes on Property Management for Foreign Investors.”

After signing the sales contract, one needs to think about to whom the management of the valuable property should be entrusted… The task can always be delegated to a trusted third party. In this chapter I am going to spell out the aspects that foreign investors should heed regarding property management in Japan.
— Ishiyama Kazumichi, Smica Create

You will learn more when you read the book.

For our part, we took notes on several topics including a helpful list of management fees associated with owning a condo in Japan. Foreigners that own a second home in Sapporo, or a rental unit in Niseko, will benefit from practical notes about how foreign investors can manage their rental income (via a property management company), notes about services provided to foreign owners by tax administrators, and good comments on taxes related to owning property in Japan.

Investment Property Evaluation Services in Japan

There is an interesting section of the book titled “The To-Do List for Property Investment in Japan,” with notes and guidelines for investing in real estate in Japan. There are comments on evaluating which cities in Japan are right for investors, getting market data from Japanese real estate brokers, a checklist for things to do before signing a sales agreement, and more.

This comment in particular may interest foreign investors:

I am aware that many readers may be overwhelmed by the number of things to deliberate regarding property purchase. Your real estate agents can of course provide the relevant information, but the onus of verifying their veracity falls solely on you. No worries. There are companies in Japan providing property examination services for non-residents.
— Matsunaga Yutaka, Tenyu Asset Management

This concept of “property examination services” is intriguing. In our view, Matsunaga is talking about something more thorough than a simple property inspection service in Japan. Based on the notes in this chapter, this service is more of a complete evaluation and verification of legal documentation, the structure and permits, the tenants and leasing contracts, vacancy and income streams, and more. While paying for a service like this may cut into near-term profitability for investors, it may provide peace of mind for the buyer.

Particularly for foreigners buying property in Hokkaido (or anywhere in Japan), this kind of service might provide the buyer with a third-party evaluation to help make them more comfortable in the transaction.

Finding Tenants for Rental Apartments in Japan

While property management companies are sometimes responsible for filling tenant vacancies in rental units, that function may come as a separate service provided by a leasing agent specialist.

The search for tenants is usually handled by specialized leasing agents, whose business is very different from that of transactional agents. Commission fees for these leasing agents in Japan… usually amount to one- or two-month’s rent, payable upon the closing of a deal. As far as income is concerned, most leasing agents only care about striking as many deals as possible. Finding proper tenants for clients is not their objective.
— Cheung Neo Wing Tat

It is true that agents that handle buying and selling of housing in Japan will not necessarily help with renters, but many real estate offices provide both services. The truth is there is no clear distinction between most real estate companies in terms of renting, selling, and managing property in Japan; many companies offer all three.

Paying Cash for Property in Japan

For certain markets in Hokkaido, most purchases are completed as cash sales. Property purchased in Niseko is almost exclusively done on a cash basis, with no discount, as all-cash payments are expected (loans for property in Niseko mostly do not exist).

In other markets in Japan all cash purchases are more optional, but may help in the negotiation of price or other terms of the transaction.

Most buyers who set their eyes on rental properties would have secured funding from a financial institution in advance, buying with cash does not necessarily mean more benefits (e.g. paying less for the deal). That said, some real estate does only accept cash payment. This implies competing buyers who need mortgages will be ruled out, while those buying outright will have more leverage to bring down the purchase price.
— Hiraga Mitsunori, Lighthome

We recently wrote about cash for homes businesses in Japan. There are more notes on all cash real estate transactions in Japan in that post.

Buying Property in Fukuoka

As a part of the recent boom in real estate values in Japan, the big cities of Tokyo and Osaka are commonly discussed. In addition to those markets, both Hokkaido and Fukuoka are commonly referenced as regions offering especially strong returns. While Winning Strategies does not offer any information about Hokkaido or Sapporo real estate, there is a whole chapter on Fukuoka.

In view of its growing population and economy, Fukuoka is probably one of the few cities in Japan that offers fitting opportunities for real estate investment.
— Shojima Yoichiro, Pros Corporation

That quote is from a chapter called, “On Fukuoka: Investing in Fukuoka Residential Property”; a very interesting chapter, providing excellent background on the history and opportunities with real estate in Fukuoka.

Buying Property in Osaka as a Foreigner

Another regional showcase provides a review of real estate in the Osaka prefecture.

The Osaka City is a population of 2.68 million, which has been on the rise in recent years. The main reason is increased housing supply in the city centre. Given the growth of Osaka’s population is largely driven by foreigners, many of whom migrated for the city’s convenience, its population is expected to keep expanding.
— Hirokawa Katsuichi, Cross Japan Corporation

This section covers not only Osaka City, but also offers information on other cities in the region including general overviews of real estate investment in Kyoto, the Hyogo prefecture, and Kobe.

Buying Property in Tokyo

No real estate book focused on Japan would be complete without some reference to Tokyo. Winning Strategies has two separate chapters on Tokyo, along with various notes in many of the other sections.

It’s time to invest in the world’s largest metropolis Tokyo!
— Takebayashi Tomohiro, First RE Company

Everyone knows that Tokyo is the largest city in Japan, to which talent, resources, and capital across the country are drawn. According to the global consulting firm at Kearney’s 2014 Global Cities Index, Tokyo ranks 4th after New York, London, and Paris, but comes first in Asia.
— Nakanishi Sei, Property Agent Limited

Looking at the 2023 version of Kearney’s report, Tokyo remains ranked 4th. Tokyo is valued internationally, year after year. The rising role of Asia as an global economic center makes Tokyo’s influence increasingly compelling. The Japanese love Tokyo, and so do visitors and investors from neighboring countries.

Real Estate Taxes in Japan

In the second half of the book, there is a very detailed chapter on taxes in Japan.

Taxes in Japan are broadly divided into national tax and local tax. In the following, I am going to outline the items under each category.
— Shinichiro Heda and Tomoyuki Shimizu, Deep Impact Corporation

This section of Winning Strategies is extensive, with table after table of detailed tax information, including taxes related to real estate in Japan, a specific section on transactional taxes for the sale of property (as well as the annual property taxes in Japan), notes on tax administrators, details on property acquisition tax in Japan, and other topics.

Registering Your Property in Japan

The last two chapters in the book provide details on the system of registration for property in Japan. This is the process for how ownership is recorded and legal rights for property are ensured.

Japan’s real estate registration system aims at regulating the shift or removal of property rights through a cross-country database. All updates on the database will be published at once to ensure transaction security and rights of property owners. There are two types of entries under the system, namely land and building structure. Owners’ names and rights form the basic contents.
— Nakajima Michihito, Nakajima Comprehensive Law Offices

Both national and foreign buyers need to register the title changes of their properties with their own names in Japanese. For foreign individuals or companies, their names can be written in kanji (those used in Japan) or katakana. Only for names that can’t be signified in kanji should resort to katakana for phonetic transcriptions.
— Aratani Kenichiro, Ace Judicial Scrivener Office

These two chapters are prepared by two separate judicial scriveners, and provide an excellent education on some of these legal details.

A Weaker Yen Means More Purchasing Power

While Winning Strategies for Japan Real Estate Investment was written in 2017, some trends are even more true today than when the book was published:

Yet things have changed since Prime Minister Shinzo Abe took office in December 2012. The Japanese yen is plunged 40 percent… hot money from around the globe, including China, Hong Kong, Taiwan, and Singapore, has been flooding into various Japanese asset classes including real estate.
— Cheung Neo Wing Tat

As of January 2024, the dollar to yen ratio (at almost 150 yen per dollar) is the strongest it has been since the mid-1980s. That means that foreigners can get more property for their capital than even a few years ago. That is true for US dollars, but is also true for the currencies of the neighboring Asian countries.

Closing Remarks

As far back as 2017, Cheung and the other authors of this book could see tremendous value for Asian buyers of property in Japan. With property prices increasing for the first time in almost 30 years, and an exchange rate that favors Asian currencies, that trend is as true today as any time in recent history.

As a final comment to wrap up this review, we leave you with this quote from Cheung:

For those who are interested in buying properties in the country, whether for ownership or for investment, Winning Strategies will serve as a great reference book.
— Cheung Neo Wing Tat

The various voices that come together in Winning Strategies for Japan Real Estate Investment create a rich opportunity to see Japanese real estate transactions from several points of view. We read every page, and came away with a better understanding of buying investment property in Japan and related topics.

Highly recommended.

—–

If you are interested in other books on real estate in Japan, we provide a similar level of detail in our review of Landed Japan, by Christopher Dillon. We also feature a review of Yamamoto’s The Savvy Foreign Investor’s Guide to Japanese Properties, a review of the 2023 book called Real Estate Transactions in Japan, and additional overviews of several more books in our post on the best books about Japanese real estate.

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For More Information:

— Our collection of articles on real estate in Sapporo
— Some details on buying a house in Niseko and more
— Research on property in Otaru
— More general articles about Hokkaido real estate
— Some particulars on real estate taxes in Japan