The Impact of the Weak Yen to Foreign Investment in Japan Real Estate

In the past year, the yen has rapidly depreciated in value against the US dollar. It tumbled to around 150 yen to a dollar in October 2022, falling to a 32-year low.

This weak yen has led to a dramatic increase in foreign investors looking to buy real estate in Japan. So how is the weak yen related to foreign investment in Japanese real estate?

In this article, we examine the impact of the weak yen to foreign investment in Japan real estate.

Why does a weak yen attract foreign investors?

First, let’s take a look at why a weak yen entices foreign investors to buy Japanese real estate. It’s easier to understand by using actual numbers. For example, in a case where an investor wants to purchase a property worth 100 million yen, let’s compare the numbers when the exchange rate is 110 yen to a dollar and 130 yen to a dollar.

■ 110 yen to a dollar: property can be purchased at 909,090 dollars

■ 130 yen to a dollar: property can be purchased at 769,230 dollars

As you can see, a difference of 20 yen in the exchange rate translates to a difference of 139,860 dollars in the purchase price of the property.

From the perspective of a foreign investor, a weak yen generally makes Japanese properties cheaper to buy. And with the current value of the yen, many foreign investors feel that now is a good time to invest in Japanese real estate.

Why do foreign investors find Japanese real estate attractive?

Besides the weak yen, there are a number of other reasons why foreign investors find Japanese real estate attractive.

Firstly, foreigners can acquire freehold rights (or full ownership) to real estate in Japan. This is not the case in many other countries, where foreigners can buy land and property but cannot gain full ownership of it.

In Japan, foreigners generally have the same rights as Japanese when it comes to buying and owning real estate in Japan.

Secondly, rental yields are generally high in Japan compared to other countries. For example, the typical rental yield in China is 1% to 2%, but a prime property in central Tokyo can have rental yields of 4% to 5%.

A third reason is that investment in Japanese real estate gives a steady, stable income. Compared to other countries, tenants in Japan move less frequently, and the market price for property rentals is relatively stable.

These are just some of the reasons why foreign investors find Japanese real estate attractive.

Increasing number of inquiries from foreign investors

So how has this affected the actual number of inquiries from foreign investors? With the enforcement of entry restrictions to Japan for foreign nationals in March 2022, and the weakening of the yen from the same period, the number of inquiries to our company from foreign investors has increased significantly.

Comparing it to the situation before the COVID-19 pandemic, we can see the following trends in the inquiries.

・The nationalities of the foreign investors are becoming more varied.

・The number of inquiries from first-time real estate investors are increasing.

Another recent trend in foreign real estate investment is the high level of interest in famous areas like Shinjuku and Shibuya. Although the rental yield can be relatively low in these areas, it appears that they are choosing these areas based on the high possibility of acquiring tenants.

Increasing number of property owners who want to sell to foreign investors

The weak yen not only affects the activity of potential property buyers, but also the activity of property owners who are looking to sell.

As a matter of fact, the number of inquiries to our company from property owners who want to sell to foreign investors is increasing. They all see how the weak yen has made now a good time to sell to foreign investors.

In some cases where certain conditions are met, property owners are able to get a purchase price that is much higher than the property value assessed by a Japanese real estate agency.

Based on all these factors and the recent activity of foreign real estate investors, our company believes that now is indeed a good time to be selling property in Japan.

Summary

The weak yen has led to a definite increase in the demand for Japanese real estate from foreign investors.

Whether you are a foreign investor looking to buy property in Japan, or a property owner in Japan who is looking to sell, we at wagaya Japan are confident that we can help you find what you need. wagaya Japan operates a real estate website aimed at foreigners, and we get over 150,000 visitors every month.

・To investors who are looking to buy property

We can introduce properties and provide support during your purchase. After completing the purchase, we can also assist you in managing the property, finding tenants, and other financial matters that can be complicated to understand.

・To property owners who are looking to sell

Through our multilingual staff and our strength in dealing with foreign real estate investors, we can help you sell your property quickly and at a high price. Contact us for a free assessment of your property’s value.

wagaya Japan is a partner you can trust for buying and selling real estate in Japan.