Japanese real estate can offer the potential for income, diversification, and capital preservation for foreign investors, all while providing inflation protection.
In many parts of the world, the all familiar mantra, “Location, location, location” has become, “Inflation, inflation, inflation,” with rising prices due in part to rising interest rates. Investors have a lot to grapple with. Interest rates have put significant pressure on both stocks and bonds for the first time in decades.
Certainly unusual as bonds generally have been safe investments, protecting investors from volatility of stocks. Seeing the simultaneous decline of both stocks and bonds, investors have become concerned enough to seek other strategies to generate returns, turning to real estate for its long-term capital preservation. In this way, investors can hedge the impact of inflation and potentially generate positive returns over the next few years, even in a heightened inflationary environment.
But not all real estate markets are the same. Properties can be quite expensive in the “safer” markets with lower yields.
As the second largest real estate investment economy in the world after the US, Japan has been the choice for many investors, particularly during volatility.
The reasons are many; first, inflation is much lower in Japan than other parts of the world. Second, the country has been viewed as a shelter amidst turmoil. Third, investors have been drawn to the weak yen, low interest rates, and healthy real estate returns.
Overall, with inflation and interest-rate uncertainty, Japanese real estate can offer the potential for income, diversification, capital preservation for foreign investors, all while providing inflation protection.
Global Property Price Comparison
Japan property prices (other than Tokyo) are highly affordable compared with prices in top real estate markets. A two-bedroom apartment can be purchased for under $200K. Take for example, thriving Fukuoka. A 2 bedroom with living room, dining room and kitchen is approximately $130K.