Compassionate Rant: The Unfair Advantage Foreigners Hold in Japan's Real Estate Market
Foreigners find it alarmingly simple to acquire real estate in Japan
By Gearoid Reidy, Opinion Contributor for Bloomberg
In the Land of the Rising Sun, a gold rush of sorts has occurred in recent years - only instead of gold, it's abandoned houses, or akiya. These houses are now being touted to foreigners, thanks to a booming industry that's seen a surge of interest from those impacted by skyrocketing property costs in their own countries. But while the Japanese countryside can provide a reprieve from city life, living there doesn't always equate to a lovely slice of My Neighbor Totoro.
The problem lies in the ease with which foreign investors can acquire property in Japan, and it's creating quite a stir. With hardly any limitations or disincentives, Japan's property market feels downright absurd at times, particularly amidst increasing concerns about property prices surging in Tokyo and other major cities.
In the heart of Tokyo, the average cost of a new apartment now exceeds ¥100 million, and second-hand apartments in central areas have more than doubled in value since pre-pandemic times. Not to mention the exorbitant pace of increase, which leaves many feeling priced out and frustrated.
So, who's to blame? The lack of new apartments, inflation, worker shortages, the rise of dual-income households - all potential culprits. But to the discontent of many, the spotlight is increasingly trained on foreign buyers, particularly the wealthy Chinese, seeking a secure haven for their investments, drawn by Japan's stability and safety net.
Lawmakers and commentators are now urging stricter regulations on foreign property purchase, taking to parliament and media outlets alike to voice their concerns. Former soccer star-turned-investor, Keisuke Honda, even went so far as to tweet that he believed foreigners should be barred from buying property in Japan altogether.
One complicating factor is the scarcity of reliable data on transactions. Japan does not gather information on the nationality of buyers, making it challenging to quantify the extent of foreign investment's impact on the market. But a recent developer survey by Mitsubishi UFJ Trust & Banking Corp suggests that 20-40% of new apartments in central Tokyo may be owned by foreigners. Given the lack of reliable data, it's high time Japan conducted its first-ever comprehensive property survey to truly grasp the situation.
It's worth noting that Japan only began imposing restrictions on foreign property purchases in sensitive areas like those near military bases and nuclear plants this decade. Beyond these isolated exceptions, foreign investors are free to dive headfirst into the market, without even needing to reside in the country, and without any additional taxes or duties applied specifically to foreign purchases.
Compared to its regional counterparts, Japan's approach is notably lenient. Singapore, hoping to prioritize local buyers, recently doubled the stamp duty on foreign buyers to a whopping 60%. Meanwhile, Hong Kong only very recently removed a similar curb to stimulate its property market. In comparison, Australia has even imposed an outright, two-year ban on foreigners buying certain homes, while Canada has continued an extended prohibition.
While Japan need not take such radical measures, the international appeal of Tokyo is undeniable, and it's a good time for lawmakers to take action - before growing public resentment fuels further unrest. Residents, whether foreign or Japanese, should have priority over speculative buyers seeking properties for occasional use. After all, governments desperate for revenue should maximize tax collection, especially in light of the ongoing shortage of properties. Furthermore, discouraging excessive property holding in Tokyo's urban areas is essential to prevent owners from hoarding properties that go underutilized.
It's reasonable for the Japanese to feel upset when Chinese investors flood the market with the snap of a finger, considering that the reverse transaction is practically impossible. Japan's stability during challenging economic times was built on providing fundamental services like housing, a luxury many Western economies have failed to maintain, breeding widespread discontent. As Tokyo reemerges, let's hope it learns from others' mistakes.
Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas. He previously managed the breaking news team for North Asia and served as the Tokyo bureau's deputy chief. His views are his own and do not necessarily reflect those of the editorial board or Bloomberg LP and its owners.
[1] NHK article on Japan's first-ever property survey: (no longer accessible)
[2] Japan Today article on increasing scrutiny of foreign property purchases: (Accessed 2023-05-06)
Japan's lenient property market regulations, particularly in the real-estate sector, can provide a significant advantage to foreign investors, as they can acquire properties easily without many restrictions. This has sparked debates, considering the rising concerns about property prices in major cities like Tokyo. In contrast, some countries have introduced stricter regulations on foreign property purchases to prioritize local buyers, such as Singapore and Hong Kong.
