NEWS

Hello everyone!

We are here to talk about the hot topic of real estate investment overseas.

We will continue this series today. Some of the contents are the same as last week's article, but please read on.


Overseas real estate investment literally means investing in and purchasing real estate properties such as condominiums and apartments overseas. The objective is to earn capital gains from the increase in real estate prices, which is unthinkable in Japan, or to earn stable and continuous rental income (income gain) by renting out high-yield properties as leases.

What are the advantages of investing in overseas real estate?
With the recent acceleration of the yen's depreciation, we hear more and more that prices in Southeast Asia, once an emerging market, are no longer inexpensive. Let's take a look at some of the most commonly cited advantages of investing in overseas real estate.

Rising housing prices and high yields
The first merit is that overseas, compared to Japanese real estate, high real estate price increases can be expected. Prices are rising in Japan and real estate prices are also rising, but if we compare the rate of increase from a global perspective, we can honestly say that it is lower than in other countries.

A review of the Organization for Economic Cooperation and Development (OECD) long-term housing price index shows that housing prices in Japan peaked in 1991 and have been declining for the past 20 years, while in OECD countries, housing prices have been rising over the long term, with some short-term fluctuations.

Since the OECD consists mainly of developed countries, the gap with Japan is expected to be even larger when including emerging countries, and there are many opportunities for overseas real estate investment when targeting capital gains from housing price appreciation. This indicates that there are many opportunities for overseas real estate investment when targeting capital gains from housing price appreciation.

Real housing price index (Japan vs. OECD average, price-adjusted, 2015=100)

Income levels are on an upward trend in all countries except Japan, both in developed and emerging economies, and rents are rising in line with the rise in income levels, which can be expected to generate a yield.

According to data from Global Property Guide, which provides information on yields and price per square meter for condominiums of similar size located in major areas of major cities, the yields for properties in urban centers in each country are

Jakarta, Indonesia: 7.1%.

Manila, Philippines: 6.1

Phnom Penh, Cambodia: 5.3

Bangkok, Thailand: 5.1

New York, U.S.A.: 2.9

Tokyo, Japan: 2.7

This shows that yields in Southeast Asia are usually two to three times higher than those in Japan.

Risk Diversification through Asset Diversification
Holding assets only in Japan, with its declining population and the risk of natural disasters such as earthquakes, is a risky proposition.

In addition, while many other countries are currently raising interest rates, Japan is expected to see interest rates rise in the near future. However, the current low interest rates are accelerating the selling of the yen, mainly due to interest rate differentials, and the value of the yen is declining compared to currencies around the world. Holding assets in yen can be said to carry the risk of asset decline due to exchange rate fluctuations.

The change in the value of the yen against major currencies over the past year
In addition to the geographical diversification of assets by owning real estate overseas, the ability to earn rental income in the local currency reduces the risk of exchange rate fluctuations and allows investors to benefit from foreign exchange gains when the yen depreciates (in some emerging countries, rental income is denominated in dollars). (In some emerging countries, rents may be denominated in U.S. dollars.)


You can understand the world situation very well.

We believe this is useful information for those who will consider overseas real estate as one source of income in the future.

Please look forward to next week's issue!


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