Regulations

Hidden Defects : Risks in private real estate investment in Japan (Part1)


There are risks associated with any investment – loss of capital, finance, leverage and liquidity risks and so on.

Not like buying the paper assets such as REITS, many of these are only relevant to the direct investment (where the investor invests, owns and has control over the real estate asset).
This article will highlight the main risks associated with investing in real estate in Japan and provides commentary on how to analyse and mitigate these risks.
Today I am going to discuss the risks at time of acquisition.
Unlike regulated industries such as accounting and financial planning, working for a property company (as distinct from working as a traditional real estate agent),
does not require a great deal of education, experience, or study prowess. Marketing investment property requires nothing really but the ability to sell.

That is one of the reasons why there are unlicensed (often rogue )
‘property consultants’ in Japan.
Engaging in the marketing activity to lure the investors without holding a license is against the
Building Lots and Buildings Transaction Business Law. If your consultant or agent do not hold
the license, your contract is not protected by the said law.

For more information, please see my post on February 11, 2018.
Are there any rogue real estate agents in Japan ?
At the end of the day, even the good agents cannot guarantee the success of the investment and thus investors must learn the risks and returns
before they make a investment.

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Are there any rogue real estate agents in Japan ?

The real estate trade can be stressful in any country.
The financial commitment is substantially large, the regulations and laws are complex
and the market risk is high.  Average Japanese people share the same concern.
Another problem is a large part of consumers’ assumption that all estate agents, letting agents and
landlords are all regulated. In Japan, all the agents who actually arrange the real estate transactions
(including rental contract) 
must be licensed.
Engaging in the marketing activity to lure the investors without holding a license is against the
Building Lots and Buildings Transaction Business Law. If your consultant or agent do not hold
the license, your contract is not completely protected by the said law.
It would be treated more under civil law. But if your broker is licensed, they are regulated by the government
and thus your contract is 
eligible for more protection under the conditions set forth by the said law.
Nonetheless, there are some rogue agents or consultants who are not licensed in Japan.
For example, such rogue agents put up advertisements for properties on which they have not been
instructed to promote in an attempt to get a cut of the fees.

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Notorious inheritance tax: Is it high ? -Brief on Inheritance tax in Japan as of 2017-

It comes to my attention that many foreign nationals who live in Japan
permanently or (semi-permamently) are
concerned about Japan’s inheritance tax.
I will give you some good guidance about it as follows.

1) Do we all have to pay
    the inheritance tax ?

There is growing concern about the inheritance tax in Japan. In 2013,
the Japanese government passed the bill and lowered the deductible amount
for charging the inheritance tax (hence effectively raised the tax rate).
The new law became effective from 2015.
However one statistics say the currently only
about 8 out 100 taxpayers in Japan are actually imposed the inheritance
tax so majority of us
do not really have to worry about it
unless you are very high net worth investors or entrepreneurs with
the net taxable asset which 
is well over 100 million yen or so.Read more