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Why Japan Real Estate

Why do we expect the real estate market of Japan to provide ongoing increases in capital gains and solid returns on all wise investments made?

We promised not to get too technical within the pages of this web site. We ourselves are simply ordinary investors with a great deal of experience. Now is everyday terms let's take a look at the some of the forces that can affect capital gains and solid returns from real estate. Let's see why we believe that the buoyant real estate market in Japan today will continue to grow for many years to come.

Interest and Real Estate prices.
We know that interest rates can affect the price of real estate. The lower the interest rate the easier it becomes for the folk to be able to afford repayments on property purchased using finance, the more buoyant the market becomes. In turn, the easier it is to afford property the higher prices can rise. Pretty simple really. On the other side of the coin real estate interest rates can and are used to slow down ‘overheated’ markets. In Australia for example, towards the end of 2004 we saw the interest rates being moved up and we saw sudden drops in real estate prices reflecting these interest rate increases.

Now if we consider that an upward trend in real estate prices has to start at some point in time and end when interest rates become prohibitive we have the gap to work in. By gap we mean the difference between the interest rates at the start of the “boom” and interest rates that are too high for real estate investors to work. Using Australia as an example again we know that real estate prices started to lift from about 1997 and we know interest rates were set at around 5% at that time. We also know that prices soared between 1997 and 2004 and were brought to a halt when interest rates hit 6.95% after a round of successive, sudden quarter point increases. Therefore we know real estate prices rose for an interest rates of 5% and 6.95%.  And we know they stopped at 6.95%

Salaries and Productivity.
An often-overlooked fact is that salaries have a dramatic effect on the price of real estate. It is important as a property investor to look at the level of salaries in comparison to international productivity. If salaries are comparatively too high at the time a real estate boom commences the RE price increase cycle will be shortened, the higher the salaries at the start of the boom the shorter the boom. If we accept this as fact then we begin to understand why even facing safety risks, the real estate markets of developing countries are so attractive to mature investors. As the property prices rise so does the country and it’s people’s salaries keep up to cope.  When salary increases slow down and can’t keep up with the compound or separate effects of rising prices and interest rates, property prices stabilize.

Japan.
In 2005 Japan’s productivity levels are the best in the world. Productivity is high, salaries are very low. The US Government stated in it’s report 25Th feb. 2005 * http://www.bls.gov  that of the 14 developed nations measured Japan is number one. This is quite logical when we consider that Japan saw fourteen consecutive years of recessions between 1990 and 2004. The Japanese economy will lift. When it does there will be a great deal of pressure on employers to increase salaries. Salaries will grow. The Interest rate in Japan at August 2005 is set at around 1.6%.

In a nutshell we at Japan-Investments.com have our money firmly placed on the chance that with such internationally low interest rates, low salaries and high productivity, the buoyant real estate prices in Japan today will rise further and when they do they may continue to rise for quite some time.

*Full details of USG web report. http://www.bls.gov/news.release/prod4.nr0.htm

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