How COVID-19 is Impacting the Japanese Real Estate Market
Because of the increasing impact of the COVID-19, the economics has been put on pause and the impact is going more severe around the globe.
It’s said the damage is bigger since Lehman Shock and the Japanese Market has been impacted as well.
In this situation, we are here to introduce you the latest changes caused by COVID-19 if you are planning in investing, purchasing and selling real estate in Japan.
１、The price hit the top in 2019
Before the COVID-19, the average price of the new house was 59.8million JPY in 2019, which is the second highest price （61.23million JPY）since 1990.
Along with the booming of the new house market, many people tend to go with the second hand houses which resulted into price increase as well.
It is not hard to understand that the economic bubble was the main cause of the real estate booming in the 90`s, and what about this time?
Considering the causes, to get ready for the 2020 Tokyo Olympics as well as the Osaka Expo, many accommodations are opened near the event location.
Secondly, the construction workers are short of hands is also being considered.
Altogether that`s what caused the price increase of real estate.
However, now the economic activities are paused because of COVID-19, the Olympics are also postponed to year 2021, and it’s still hard to foresee the upturn of the situation, we are afraid the market will farewell the booming for now.
2．The consumers are giving a second thought on purchasing houses.
（1）The tendency of the average consumer
Due to COVID-19, the replacement and showroom inquiries are all postponed because people are worried about the infection even if they decide to purchase second hand houses.
As for the newly constructed houses, because the installation of the bathroom facilities are getting late, the completion of the project is accordingly impacted.
Suppliers like TOTO and LIXIL ect are not able to deliver the goods on time because their factories in China were asked to stop during the quarantine.
People also have to change their plans of purchasing and replacement accordingly, and that`s why the market is cooling down.
What`s more, the unemployment and payroll cut happened during this period is considered as the biggest reason that made the consumers turned negative about purchasing houses.
（2）What`s the impact on house loans?
For those who want to get loan from bank to pay for the real estate may face problems like tougher financial check and increasing interest rate, because banks have to deal with risks that people are not able to pay the mortgage on time due to employment and payroll-cut coming from COVID-19.
3．The impact on real estate investment
（1）The decrease of rentals
Many companies had to stop business during COVID-19, a lot of part-time employers were either going through employment and income cut. Due to the above, requests like delayed rental payment and application of rental cancellation are increasing.
（2）Less foreign residence
Impacted by the entry restriction caused by COVID-19, the number of foreign residence are decreasing a lot, some even had to terminate their residence contract.
What’s more the foreign investment has received great shock on the real estate market as well because of COVID-19
（3）The decrease of rentals
The price of investment real estate will drop?
Even if the Japanese government has issued several supporting programs to balance the negative impact, the drop of real estate interest is considered inevitable.
At the same time, the price of real estate itself is dropping as well, many investors are putting on hold of investing decisions and the banking industry is negative about giving house loans.
4. The right timing for real estate investors is?
Due to COVID-19, it seems that many are looking forward to selling the houses as soon as possible, so to say, the change of balance between needs and supply will lead to lower buying price.
Taking advantage of the real estate bubble and purchase houses was what many investors did during the earlier ages when the price was impacted by the earthquake and etc.
Especially if the payment is processed by cash, you may get what you want with lower price.
5、 To Summarize
Let’s say the current real estate market may go as what we summarize below.
Generally speaking a big impact from COVID-19 is inevitably going to happen, the delay of mortgage payment, more competition in the industry will lead to the price dropping down to 50% to 70%. If you are considering any related trading, please feel free to consult us.
Also, if you are considering to purchase real estate in Japan, please pay attention whether the seller has any delayed tax payment in case the house is no longer available to be sold.
We are in touch with many similar cases at the moment and likely the inquiries will increase given the current situation.
Hope you’ll find the reading useful, and if you are looking forward to professional advice on this subject, we are happy to hear your voice.