As investor confidence lowers in correlation to the rest of the world, there has been a noticeable slow-down in the Japanese property market. Rents which have been soaring in Tokyo for some years now are finally slowing down. There has been uncertainty in the market generally, with most investors going for low risk and low return investments. Shares and property have flooded the market for some time now, and large foreign investment firms are picking up the pieces.
There have been recent drops as high as 54% over six months in the real estate sector, as measured by the Nikkei index in Japan. The Nikkei average has dropped by around 33% over the six months after last year's record highs.
Investor sentiment in Japan is very uncertain, with many investors returning to low risk traditional investments like bank deposits and government bonds. They are also looking overseas to place their money, having little confidence in the market's ability to pull itself up in the near future. The Japanese yen has also fallen drastically.
Perhaps the most plain expression of investor sentiment is a recent Reuters poll, which ranks investor feelings monthly. The score in January was minus 60, the lowest one since the inception of the poll. This was only slightly improved upon in February. These results are all generally attributed to the US subprime crisis and credit crunch.
All this negativity from local investors creates high numbers of sales and a sluggish property market. Experts in property management in Japan say that there have been record numbers of properties on the market and sales have been especially slow. However, as the divide between the 'have's and the 'have-not's grows wider, those who still have a surplus of funds are able to buy record amounts of property at extremely low prices.
GE Real Estate is one such company. A spokesman, Tomoyuki Yoshida, said of the current market conditions in Japan: ''The market is favourable to GE. Small to medium sized fund managers have a huge issue about getting financed. They have to dispose of a lot of properties."
The property arm of a major real estate company is preparing to acquire around $10 billion worth of real estate in Japan this year, in anticipation of the current market conditions continuing. The credit crunch is set to continue (along with its impact on the Japanese economy), the cost of borrowing will increase, and Japanese real estate trusts will have to sell up at quite low prices to be able to survive. All this makes GE, and other large firms, able to gain record numbers of properties at excellent prices.
However, there are some that are happy about the falling prices on the property market in Japan. Renters in Tokyo have traditionally been stung by some of the highest rents on the planet, along with such enormous metropolis' as London and New York.
In some neighbourhoods, rents last year increased by up to 20%, with several experiencing 10% gains. However, the market slowdown should mean a correction in the price of rents is looming, providing welcome relief for lessees.
As always, there are winners and losers in property markets and economies. Currently in Japan, large firms have been able to take advantage of their position, and renters are also experiencing budgetary relief.
Committee On Foreign Investment
Imagine a tropical paradise only a plane ride away? free of worries that seem so commonplace in our society, such as terrorism, government intervention in business and a higher cost of living. This dream is becoming a reality for thousands of American foreign investors each year as they invest in the burgeoning Costa Rican real estate market and find themselves calling this their new home.
And why not? With a temperate climate, plenty of ocean view property and a relaxed lifestyle, Costa Rica is the ideal locale for those searching for a solid investment in foreign real estate. However, Costa Rica also has so much more to offer than other countries with similar climate and terrain. Favorable foreign investment policies, a stable democratic republic government and fair tax laws are just a few of the factors that set Costa Rica a world apart from other international investment opportunities.
Add to this a low crime rate with virtually no violent crime, a military free existence and property prices that are still attainable for the average investor, and it's no wonder the number of North Americans relocating to Costa Rica has tripled in the last decade.
Perhaps the most attractive of Costa Rica's benefits is the government's favorable attitude toward foreign investors and visitors. Americans can stay in Costa Rica for up to three months while earning income from self-employment, owning a vehicle and even purchasing real estate. After this, becoming a citizen of Costa Rica is not a difficult process. And while foreign investors live the Costa Rican lifestyle, enjoying world class golf and evenings at the beach, they pay income tax only on their income earned in Costa Rica; foreign income is not taxed.
With a 13% sales tax on goods and services and a lower cost of living, a family of four with a house and car can live quite comfortably for just $1000-$1200 US per month. Both property tax and capital gains tax are lower in Costa Rica than in the US. Yet the standard of living is comparable to that in North America, with high-speed internet access and all of the other technological comforts to which we have grown accustomed. Health care is advanced and readily available in sterile and comfortable hospitals. Sanitation in Costa Rica is excellent, with modern plumbing and safe drinking water throughout the country.
One must set up a corporation in order to invest in Costa Rican real estate. This is arranged through a local lawyer or by employing the services of an investment company such as Costa Vista Land, who walks the investor through each phase of the investment process. Using their services eliminates the traditional speed bumps involved in foreign investment, such as language barriers, unfamiliar law and locating suitable properties.
As the value of Costa Rican real estate continues its rapid rise, with property prices often doubling between the time of purchase and development, the country's government and people recognize that this trend is a positive one for their economy as a whole. Foreign investment is encouraged and the locals are friendly and warm to newcomers. Police treat foreigners as they do citizens and foreigners are entitled to the same rights under the law as citizens.
Costa Rica boasts a long and proud history of political stability. After a civil war in 1948, caused by a President who wished to remain in power longer than his four-year term, a change in the constitution was implemented to limit Presidency to one term and banning military in the country to prevent such an incident form recurring. Other than that incident, Costa Rica has enjoyed a peaceful existence since founded.
Costa Rica has successfully changed with the times to remain a leader in infrastructure, transportation and technology amongst its South and Central American counterparts. Highways and bridges are safe and well built, while air service is convenient and affordable with direct flights to the US averaging about $550 return.
All indicators point to Costa Rica as a wise foreign real estate investment destination. The secret to success in this market lies in getting in on the action while the potential for massive financial growth remains and before the limited available properties are purchased by other investors.
Both Gregory Smyth & David Lovendahl are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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