This week, we shine the spotlight on foreign investments in Japan, with a focus on real estate. Many apartment blocks have been built in the Tokyo area in recent years. The average sale price of newly built apartment blocks within the 23 wards of Tokyo rose to more than 100,000,000 yen at one point. Many Chinese invest in properties in Japan due to both countries being in close proximity and a weaker yen. During a certain period, apartments in prime locations in Tokyo were also 20-30 per cent cheaper compared to properties in Beijing or Shanghai. China’s economy had also weakened at some point, with the property market cooling.
Property investment seminars targeted at Chinese investors are often held online, with investors from cities like Beijing and Shanghai participating. For example, real estate firm YAK organises such seminars. Founded eight years ago, it has about 100 employees and 90 per cent of them are from China. Furthermore, up to 95 per cent of its contracts are with Chinese customers. In December last year, Mr Zhu Zhong Lin from Shanghai visited Japan to invest in properties. Mr Xiao Ziyi from YAK took him around to see potential sites. They visited Nakano Street near Chuo Line’s Nakano Station. It is known as a famous place for viewing cherry blossoms. Mr Zhu was keen on a high-rise block built in the 1960s. It is a three-minute walk from Nakano Station. The property was built 55 years ago and the monthly rent is around 230,000 yen. Meanwhile, its selling price was 45,000,000 yen. Mr Zhu owns three clothing boutiques in Shanghai. He plans to rent out the Japan property he invests in and also eventually open his own store in Japan.
Another investor is Ms Hong from Hong Kong, who visited Japan in January this year. She is an entrepreneur who grew her wealth from real estate projects. She visited Kawaguchi City in Saitama Prefecture with Mr Koshimizu from YAK. He took her to a property located near Kawaguchi-Motogo Station on the Saitama Rapid Railway Line. It is a block of apartments built 50 years ago. The owner was selling the entire block, which comprises commercial and residential units. The outer wall had been repainted and the building was fully renovated. YAK spent approximately 40,000,000 yen and renovated every room. From the second to the fifth floor, there are 16 two-bedroom apartments. The rent would be approximately 90,000 yen. The gross rate of return on this property was 7.03 per cent. It was estimated that from rent and other sources, Ms Hong could expect an income of 25.2 million yen. The whole building had a selling price of 358,000,000 yen. After viewing the property in Kawaguchi, Ms Hong decided to go ahead and invest in it. She headed to the YAK headquarters with Mr Koshimizu to sign the contract immediately.
In the town of Kamifurano in Hokkaido, flower gardens in full bloom colour the summer. The backdrop for these flower gardens is a massive panoramic view of the Tokachidake Mountain Range. The flower gardens at Flower Land Kamifurano are the largest in scale compared to others in the Furano area. They boast 450,000 flowers of 20 different varieties such as lavender, scarlet sage and marigolds. Flower Land is owned by President Kimitoshi Ito. It has six employees, while 20 part-time workers tend to the flowers. Mr Ito is actually a farmer, growing things such as potatoes and asparagus. The products grown in his fields are not only sold directly, but also online and then shipped nationwide.
In May 1992, Mr Ito’s father had decided to use a portion of their farmland and open a tourist farm. They then opened their beautiful Flower Land. In their busiest period of 1999, the annual total number of visitors was 440,000. However, in recent years, Flower Land has faced challenging economic conditions. At the start of the COVID-19 pandemic, annual tourist numbers dropped to 23,000 to 24,000 people. With the diversity of tourist spaces and decline in tour groups, their income collapsed. Including COVID-19 loans, Flower Land’s debts grew to 120,000,000 yen.
Mr Ito has been thinking about selling Flower Land for many years. As president, he has been managing the tourist farm with his younger brother Toshiaki, who is the managing director. But there is no one to take over the running of the farm. Farm Tomita is located nearby, while the lavender field found in the area is famous worldwide. There are also about 10 tourist farms packed together in the same area. Thus, as a result of the increased competition, a lack of people to take over the business and mounting debts, Mr Ito started to mull selling Flower Land about five years ago. He then consulted Hideyuki Ishii, who runs a real estate business Nihon Shintatsu in Hokkaido. However, Mr Ito could not find anyone to buy Flower Land.
Mr Ishii’s company has about 50 employees. Besides providing real estate brokerage services, it also offers consulting and travel agency services. About 80 per cent of its customers are non-Japanese. Sometime in December 2022, Mr Ishii decided that Nihon Shintatsu will buy the company that runs Flower Land and revamp its management structure. Mr Ito will remain as president and he will manage the flower gardens. Investors from overseas will be invited to invest in the place. In late December, Mr Ishii, Mr Ito and his younger brother Mr Toshiaki held discussions regarding the sale. Unfortunately, the talks were unsuccessful as Mr Toshiaki was against the sale of Flower Land at that point. Mr Ito however still wanted someone to take over and was willing to help out in the business until then.
In early April, Mr Ishii held discussions with Mr Lim Kia Hong, an investor who has bought several properties in Japan. He is an entrepreneur in the IT and property market and is based in Singapore. Mr Ishii was keen to have Mr Lim invest in Flower Land. Mr Lim later decided to invest in it. The sale of the tourist farm progressed fast after this. In late April, Mr Ishii visited Mr Ito at Kamifurano with the basic stock transfer agreement. Mr Ito’s brother will remain in the company and will work towards training the next generation, while the management of the facilities and flowers will continue to be under Mr Ito’s care.
Tips:
1) Nakano Street near Nakano Station is a popular spot for viewing cherry blossoms
2) A must-visit attraction in Hokkaido is Flower Land Kamifurano
