Q : There are discussions about Japan becoming extinct due to declining birth rates. There is also talk that a number of properties have been abandoned in rural areas due to non-occupation as the aged pass away and the young move to Tokyo. Is the government doing something about it before it affects property prices?
ZNM : Extinction is a big word, and one that’s been thrown around rather freely by various headline- hungry services such as the USA’s Fox network (which I hesitate to refer to as a news service). One of the best rebuttals to the ridiculous fear mongering item they ran can be found at kotaku.com — just search for ‘The Entire Nation of Japan Isnt Going Extinct’. To put matters into perspective, the research quoted estimates that, statistically, if nothing changes by the year 3,000, Japan will indeed become extinct. However, that’s 1,000 years from now or, as the author of the article above puts it, “Going back and looking at predictions from the year 1012 must be equally amusing.”
Similarly, the empty houses issue needs to be looked at in the correct perspective as well. Firstly, it’s not only in rural areas that these properties have been abandoned, but all over the country, including Tokyo and other big cities. The main reason for this phenomenon is not, however, the declining population (more on that below), but the fact that the vast majority of Japanese prefer to live in apartments or, as they are called here, “Mansions”. This enables them to live in the city centres, as opposed to the suburbs or smaller towns which require a long commute to work and back, and also saves them from the need to pay the high tax associated with land ownership, as well as from the maintenance and renovation costs associated with house ownership in a country which uses light and quickly degrading building materials for most houses.
Furthermore, the fact that the average Japanese family these days has slightly over one child, statistically, with many remaining single or childless, means that the pre and post war large family homes that have been built in times when families used to live and work together under the same roof, care for the elderly in the same house, and have a high number of children, are completely un-necessary. And so, the younger generation, prefers to leave these old homes to rot, rather than pay the costs involved in demolishing, rebuilding or renovating them.
When the land portion on which these homes are built is compliant with the minimum legal limit for new construction, new homes or small apartment blocks are often built on them, usually by developers who are more than happy to take these old properties and the land off the descendants’ hands — but in many cases, current legislation does not allow for re-construction, and these old lots are either left as they are, or occasionally purchased and turned into parking lots. This, however, has virtually no effect on property prices and/or vacancy rates, except statistically. Property prices in the heart of the big cities continue to rise (in Tokyo and Fukuoka cities more than in other metropolitan centres), due to increased interest in Japan’s property market and an improvement in its economy over the last three years.
In all seriousness, however, Japan’s declining population is a matter which does need to be addressed — not due to fear of extinction, but more due to the unsustainable burden this phenomenon places on the diminishing younger generation. And while domestic robotics, a booming industry in which Japan is a world leader, offers some mitigation of this problem, it is only a partial solution. The real solution was, is and continues to be two-fold: an increase in immigration, which Japan is seriously considering for the first time in decades, and a drastic improvement in female work force and decision-making participation.
Other, more subtle issues, are social skills improvement, which is drastically lacking in a country which has placed huge emphasis on team and community contribution, sadly neglecting individual happiness and satisfaction, and a fear of change and risk – both problems that underpin the lack of marriage satisfaction, which in turn fuels the sharp birth rate decline.
PM Shinzo Abe has appointed several task forces and committees to tackle these issues, and has placed female work force participation at the heart of his economic policies, which at this point in time seem to be having a positive effect, perhaps the most positive in the last two decades. From a property investment perspective, and until this problem is resolved, which could take a few more decades at the very least, singles’ studio and 1-2 bedroom apartments for small families remain the investment class of choice, as the rural townships continue to conglomerate into the large metropolitan centres.
Matthew Yeoh is a partner of Yeoh Mazlina & Partners, member of ASEAN Legal Alliance, a group of legal firms across ASEAN.
Q :I am a Singaporean, 63, thinking of retiring in Danang, Vietnam end 2015. I plan to buy a bungalow with French architecture. My budget is about USD1 million. I don’t have a Vietnamese spouse, Vietnamese company nor do I have any employment ties with any company in Vietnam. Please explain the procedure and how many months it would take for me to settle down there.
MY : Under the new housing law passed by the National Assembly in November 2014, with effect from 1st July 2015, a foreigner is given greater access to purchase and own residential properties in Vietnam. In essence, any foreigner who is permitted to enter Vietnam may purchase multiple condominiums or landed properties, whether bungalows or link houses. However, these properties must be located in a housing project area.
According to the new law, a foreigner does not need to have a Vietnamese spouse or be employed in a local company or be an investor in a local company in order to buy a residential property. However, the maximum term a foreigner can own a property in Vietnam is not more than 50 years (which is extendable) unless he is married to a Vietnamese in which case he is able to own the property for an unlimited time.
Vietnam does not have a structured retirement visa programme similar to Malaysia or Philippines, but it allows visa-free entry to citizens of all ASEAN countries. The entry given to Singaporeans is normally for a period of one month. This permit is extendable up to four times without the need to leave the country, after which one needs to leave the country and come in again, and the process starts all over. That way a foreigner has to do “visa runs” every few months by exiting the country and entering again. This is the easiest and fastest way.
There is also a five-year long-term visa which needs to be “checked up” every three months at the immigration office. These methods of staying in Vietnam on an extended time are relatively easy to do.
Finally, Vietnam offers one-year and three-year residency permits to foreigners looking to establish a company in Vietnam. Opening a company is not a simple process and is not recommended for foreign visitors simply aiming to acquire residence to make it easier to retire in Vietnam. However, for those who are serious about operating a business in Vietnam, it is a great option for remaining in the country legally.
Vimol Kogar is Principal at bangkok 101 agency and is a long time realtor and Advisor in the Bangkok condominium market as well as consults for foreign investors interested in the Bangkok real estate sector. He can be contacted at +66816165987 or bangkokhomes@hotmail. com
Q : I am from Taiwan and am planning to buy a bungalow with land in Bangkok as opposed to a condominium. What are the restrictions on foreigners buying landed property in Bangkok? Eventually, I would also like to buy a shophouse in order to rent out the ground floor for business. Any restrictions on that for foreigners?
Foreigners are not allowed to buy land or landed property in Thailand under the law. In the case of condominiums however, foreigners are allowed to buy a maximum of 49% of ownership of a condominium while 51% must be retained by Thai nationals.
However, a foreign investor has 2 other options:
a) a 30-year lease on the property; or
b) a foreigner may register a private limited company but again he is only allowed to own up to 49% of said company. Lawyers may offer special purpose vehicles which transfers the directorship and executive rights from the local directors to the foreign director.
In this case, I would suggest investors consult a reputable law firm in Thailand which can assist in helping you decide which option is suitable. Most buyers coming into Thailand today enter the real estate market by purchasing a condominium in their own name. Until recently, getting a “foreign quota” to purchase a condominium has not been an issue in all sectors of the condominium market
But lately, developers like Raimon Land has been lobbying to increase the foreign quota to a level above 49% because most of its projects in Phuket and Pattaya appeal to predominantly foreigners. The problems encountered included a situation where even after closing negotiations for the purchase of a condominium, the prospective buyer during the process of due diligence, finds that the “foreign quota” has already been utilised, meaning he is unable to purchase. Even if 51% of the condominium remains unsold, as long as there is no more “foreign quota”, the 51% of strata title cannot legally be sold to foreigners.
Engr Reynaldo A. Carpio, Ph.D., President & CEO, Grand Monaco Estate Developers, Inc.
Q : I am thinking of investing in the Philippines residential market within the next 6 months but am worried about a possible property bubble. How easy is it for a foreigner to buy a residential property e.g. a condominium in the Philippines? How easy is it for a foreigner to get a housing loan from the Philippines banks? What % of loan margin and loan tenure can we expect?
The answer to your question depends on the use of the property, whether you want to occupy it yourself or rent it out for business income.
1. ‘Property bubble’
There was never a real bubble here in the Philippines. Only a cyclical slowdown every 9 to 10 years. But overall, experts say that there is no property bubble if we talk about the whole property market in general. There is still much space for the building of commercial and residential market.
For the residential market, there are 3 segments, one of which is oversupplied.
a) There is still a backlog of at least 3 million families without houses. So, there is demand for low-cost houses below PHP3 million.
b) For mid-end i.e. between PHP3 and PHP6 million price, there is already an oversupply. It is very difficult to sell these units. However, from the experience of the brokers and agents, it is easy to rent out them out for both short and long term especially in prime spots like Eastwood Libis.
c) For high-end properties above PHP6 million, and in particular those above PHP20 million, there is still demand both for sale and renting out.
2. How easy is it to buy residential property?
It is easy to buy condominiums in the Philippines but foreigners cannot buy a house and the land that goes with it.
3. How easy is it for foreigners to get a housing loan from the Philippine banks?
It depends on whether you already have an account in a bank here in the Philippines. It will also depend on the bank’s background check on you. A referral or bank statement from your bank in your home country will facilitate opening of an account and securing a loan here in the Philippines.
But in general, it is easy to secure a condominium loan because the condo itself is the collateral, with 20% cash downpayment. In cases of pre-selling, the cash downpayment can be amortised during the construction period.
4. Loan margin and loan tenure:
The most common is a loan margin of 80% with 20% cash downpayment. The loan tenure ranges from 1- 15 years, with variable interest rate (repricing of rates every year). Fixed interest rates can be secured for a five-year term to as low as 5.5-6.0%.
a) Because of too much liquidity (excess savings minus total loans made, which are equal to more than PHP1 trillion pesos, or USD25 billion of the USD280 billion GDP) and high savings rate (36% of GDP) of the Philippines, interest rates have been historically low and experts estimate that this low interest rate environment will stay in the next five years, facilitating a healthy property market.
b) This is boosted with net income from abroad (OFW remittances and income remittances of Filipino companies abroad minus foreigners’ income here in the Philippines) of around PHP2.6 trillion, or around USD60 billion every year, on top of the USD280 billion annual income of the country. Dollar reserves of the Central Bank of the Philippines is at its all-time high of USD80 billion, covering more than 10 months of monthly imports.
c) The Central Bank of the Philippines has very strict prudential rules on lending to the real estate sector, thus ensuring stability of banks against bubbles.
d) The choice of brand of property, then, is the more critical factor. You must invest in branded properties only. Research on the brand of the property must be made before purchase is done.