21 July 2018
A flat in this Shinjuku property costs as little as HK$3,900 per square foot, less than half the price in Hong Kong. Photo: Asia Bankers Club
A flat in this Shinjuku property costs as little as HK$3,900 per square foot, less than half the price in Hong Kong. Photo: Asia Bankers Club

Paying price of a HK shoebox flat for a decent Tokyo apartment

Business is reportedly booming for travel agencies offering trips to Japan, thanks to the softer yen.

But while some tourists are thinking only about sightseeing or buying Japanese gadgets cheaply, others are looking at somewhat bigger purchases — residential properties.

In Hong Kong, 800 would-be homebuyers recently beat a path to the doors of the showroom for Mont Vert, hoping to get one of the 25 mini flats offered by the Cheung Kong (Holdings) project in Tai Po.

The biggest unit, at 196 square feet, cost HK$2.23 million, so the price per sq ft exceeded HK$11,000.

Those buying a flat to live in probably have few better choices in a city that tops the world in housing unaffordability.

But for investors, it may make sense to look elsewhere.

With the slightly bigger sum of HK$2.65 million, one can own a 467 sq ft apartment in a prime area of Tokyo (Shinjuku in this case), with much better décor and finishing.

Flats with less attractive views are available at under HK$4,000 per sq ft in the same building.

Tokyo is known for its safety and cleanliness.

It is also the least polluted (with a reading of 34.3 on a pollution index) when compared with other metropolises, such as New York (50.7), London (53.4), Hong Kong (61.2) and Paris (67.6), not to mention Shanghai (84.8) and Beijing (95.3), an Asia Bankers Club presentation showed.

Is Abenomics going to work to revive the Japanese economy? No one has the answer.

But a few statistics underpin the demand for Tokyo property from locals and foreigners.

Tokyo has the highest gross domestic product among world cities.

It is also home to the headquarters of one-tenth of the Fortune Global 500 firms. 

Tokyo topped a WealthInsight ranking of cities by number of millionaires.

Despite the economic uncertainty, there are some positive signs in the property sector.

Bank of Japan figures show signs of bottoming in the past few years after a 15-year bear market in housing.

And the rents for luxury apartments in central Tokyo have been picking up since 2011.

For similar rents, property prices in Tokyo are about half those in Hong Kong, resulting in better yields.

Gross yield is about 5.5 percent in Tokyo, compared with 3 percent in Hong Kong, an Asia Bankers Club report said, citing the Global Property Guide.

Will the yen depreciate further?

Forecasting currency movements has proved to be a mug’s game, but there are two things worth bearing in mind.

First, the yen has already dropped substantially, to levels not seen for many years.

Also, in an age of currency wars, there is reason to believe the United States won’t want its currency to gain too much, as that may hurt its export competitiveness. If the US delays its plan to hike interest rates, it is doubtful if the US dollar can retain its current strength.

Some things are certain. Buying property in Tokyo involves all sorts of costs, just as in Hong Kong.

In Japan, the upfront cost is about 3 percent, covering items like tax and registration fee.

There are some other annual payments homeowners must make, like maintenance costs and numerous taxes, amounting to about 1 percent in total.

When foreigners want to sell their properties, agents usually charge 3 percent.

The capital gains tax is 30 percent for a holding period of five years or less, and 15 percent for a longer holding period.

Then there are other charges if a mortgage has to be arranged.

If looking for tenants is too much of a hassle, leasing and management services are available at 5-10 percent of the gross rental income.

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Tokyo properties offer a better yield, but numerous expenses have to be taken into account to arrive at the net return. Photo: Asia Bankers Club

EJ Insight writer

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