Foreign Buyers Target Japan's Affordable Empty Houses Amid Risks

Foreign buyers are showing interest in Japan's affordable empty houses, with millions of properties available at low prices. However, experts are warning that investing in these homes comes with significant risks, such as maintenance challenges, legal complexities, and fluctuating market conditions. While the opportunity to acquire property in Japan is appealing, potential buyers are advised to conduct thorough research before making any investments.

Purchasing a home can seem nearly impossible in many parts of the world due to ongoing housing shortages. However, Japan presents a different scenario, as it currently faces an oversupply of properties.

As of 2023, Japan had over 9 million "akiyas," or empty houses, according to government statistics, with some of these properties priced at under $10,000.

These houses, often abandoned for decades, are found in both rural and urban areas, creating a unique opportunity for buyers with innovative ideas.

Understanding Japan's 'Akiyas'

The increasing number of abandoned houses in Japan can be attributed mainly to a demographic crisis, highlighted by a record-low fertility rate of 1.2 births per woman as of 2023. In addition, Japan has experienced death rates exceeding birth rates as its aging population continues to grow.

According to Tetsuya Kaneko, head of research and consultancy at Savills Japan, the akiya issue has developed over several decades, stemming from Japan's post-war economic boom that led to a housing construction surge.

“The problem became more evident during the 1990s when Japan’s economy slowed down, and ongoing demographic shifts have exacerbated the situation,” Kaneko explained.

Urban migration has also significantly contributed to the number of abandoned homes. As younger generations flock to cities for employment opportunities, rural areas are left with aging populations who may either pass away or lack the means to maintain their homes.

In local culture, akiyas often carry a stigma and are perceived as burdens. Kaneko noted that heirs to family homes often hesitate to live in or sell these properties after the passing of elderly relatives, further increasing the number of abandoned homes on the market.

Interestingly, homes older than 30 years are typically labeled “old,” which raises local concerns about safety, high renovation costs, and general deterioration. Some people even associate these houses with superstition, fearing they might be haunted or bring misfortune.

As Michael, founder of the Japan real estate blog Cheap Houses Japan, stated, many Japanese individuals view akiyas as depreciating assets that cause more trouble than they’re worth. “The lowest-priced properties are priced that way for a reason,” he noted, suggesting that either the location is undesirable or renovation costs could surpass the property's value.

Attracting Foreign Buyers

Recently, Japan's akiyas have started to attract the interest of international buyers.

“We have seen a growing trend in inquiries from abroad... There has been an uptick in interest and purchases of akiyas,” Kaneko reported.

This increase in foreign interest has been partly fueled by the pandemic, remote work trends, and evolving lifestyle preferences. From young investors to retirees seeking a getaway, more individuals are looking for second homes, vacation properties, or renovation projects.

Take Anton Wormann, for example. He fell in love with Japan during a work trip. After spending two years in New York and traveling throughout Europe, he realized how expensive real estate could be in major cities.

“There’s no way I could buy a house in any of the places where I’ve lived,” Wormann stated. Once he discovered that homes in Japan were available at low prices, he decided to invest in one for himself. Six years later, he owns seven akiyas and works as a full-time content creator and real estate investor in Japan.

Wormann has renovated three of his properties and is currently working on four more. His total investment of around $110,000 for purchasing and renovating one property generates approximately $11,000 in monthly short-term rental income.

Are ‘Akiyas’ a Wise Investment?

Wormann believes the answer is both “yes and no.”

While his properties are currently yielding a six-figure annual revenue, he emphasizes that this success would not have been possible without dedicating time to understanding Japanese culture, language, and community.

“You need to build a good network and community in Japan for it to succeed,” Wormann advised. “You cannot just come here, throw money at it without understanding the culture, as that could turn into a money pit.”

He added that if approached correctly, there is considerable potential in buying inexpensive real estate for personal use.

Experts support this perspective. Kaneko remarked that akiyas can be beneficial investments for specific groups, particularly hobbyists, DIY renovators, or those in search of a peaceful countryside retreat.

However, he cautioned that akiyas may not be suitable for institutional investors or individuals seeking quick or substantial returns, citing high renovation expenses and limited resale opportunities in certain areas. Kaneko also highlighted that scalability could be a concern.

It’s essential for potential buyers to be prepared for potentially significant costs, particularly if the property requires extensive structural repairs. Additionally, they should be aware that navigating the home-buying process in Japan may be complicated due to language barriers and the need to engage with local authorities.

For questions or comments write to writers@bostonbrandmedia.com

Source: cnbc‍