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Ziv Nakajima- Magen is Manager of Asia-Pacific, Nippon Tradings International (NTI), which specialises in assisting investors in capitalising on Japan’s vast property market.

BUYING LEASEHOLD PROPERTY IN JAPAN

Q1 :What are the pros and cons of buying leasehold property in Japan?

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ZNM :Leasehold property in Japan is very rare, almost non-existent in fact, and is usually only done in one of two cases (for land only, the structures themselves are always freehold): –

a) When a residence built on agricultural land or local municipality-designated and owned land is involved – in these cases, the owner, whether it is a local farmer or the city itself, may opt to sell the structures on the land, while retaining ownership of the land itself, and may or may not charge a monthly land rental fee.

b) When a development company chooses to sell only the structured units built on the land they own, while retaining land ownership – as opposed to normal cases, in which the land parcels are divided between individual unit owners. This case is very rare, however.

The only main advantage is either of these setups would be a potentially reduced purchase price – personally, however, we as a company and as investors steer clear of such deals. The reasons are the complications involved, and the lack of capital growth potential (it is always land which increases in price, and very rarely the structures themselves) – as well as the fact that land owners can, essentially, request the structures to be removed at any point in time (which costs a great deal of money and effectively completely negates the structure owner’s investment lifecycle, while piling on extra expenses.

However, if one falls in love with a particular property, which may be the case for owner-occupiers for whatever reason, “receives” the property for a very low price (sometimes practically given away), and/or has some particular designs on the property which can only be achieved in that particular location for whatever reason (for example, if one has an agreement with an agricultural land owner to live on and work the land for profit or other business arrangements), such a deal may be viable. These are, however, extremely unique cases, and usually not within the scope of normal property investors.

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Vimol Kogar is Principal at bangkok 101 agency and 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

WHAT TO WATCH OUT FOR WHEN BUYING OUTSIDE OF BANGKOK

bangkokQ1 :Outside of Bangkok, would it be easier to purchase landed property?

VK :Outside of Bangkok, it is sometimes extremely difficult to purchase a property. Firstly, all documents are in Thai. Secondly, a buyer needs to understand the 4 types of Titles Deeds, namely:

a) Chanote or Nor Sor Sea

b) Nor Sor Saam Gor

c) Nor Sor Saam

d) Possessory Right

Once the buyer understands the different types of titles, the buyer needs a capable lawyer to go through the process of Due Diligence, namely, to do a Title Deed search and organize a Chartered Surveyor to check the dimensions of the plot and to make sure there is no encroachment.

Before you start this process, make sure the Seller has given the Prospective Buyer a 30-day option while the Buyer’s lawyer does what is necessary to cover any problems associated with both the land and the documents associated with the land.

Accessibility is also a major problem outside of Bangkok, so again buyers have to be certain that entry to his land is available 24 hours a day, in both high and low tide, and does not need an exclusive air or sea service in order to access the land. Some buyers of plots in remote islands don’t realize that some only allow entry by one boat or via a nearby airport; and only later come to realize after they have bought plots in remote islands that 24/7 access is nearly impossible.

Q2 : Can I use the name of my Thai girlfriend as the registered owner? What are the risks and how do I overcome that?

VK :Again, in the case of landed property, obviously a Thai girlfriend can wholly own a Thai property. However in the case of a foreigner marrying a Thai national, the court does not recognize the foreigner as owner of the landed property. Therefore all decisions made with regard to the landed property is entirely at the discretion of the Thai national. In terms of risks assessment on this subject, I suggest a good lawyer.

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Dan is an experienced investor with a global investment portfolio who also advises Australasian high net worth individuals. He can be contacted at Dan@Jaguar-AM.com

INVESTING IN VIETNAMESE PROPERTY

vietnam2Q1 :I am seriously thinking of investing in Vietnamese property. Can you give a picture of the property cycle Vietnam is in now and the outlook in the next 3 years?

DV :Vietnam’s real estate is now firmly in recovery mode based on firm foundations. Both GDP and credit growth have recovered as Vietnam becomes a favoured regional manufacturing hub which will help to drive sustained real income growth. In fact, economic growth is expected to sustain at +6% GDP in the short term while income and credit growth should both average +10% pa. Furthermore, policy initiatives, including the relaxing of foreign ownership regulations as well as subsidised credit markets are also helping expand real estate ownership.

Despite this, property prices are still only at 67% of peak 2008 levels. Affordability is improving. Rental yields are currently 6-8% pa. When we consider that only 30% of the population is urbanised, and expected to grow by 3 percentage points per annum, then it makes sense to concentrate on the main cities. My favoured city for property investment in Vietnam is Ho Chi Minh City, which is currently experiencing a boom in infrastructure including major urban infrastructure projects (new mass transit rail system, as well as a new system of expressways and ring roads). Therefore, the outlook for the next 3 years is very bright indeed.

Q2 :What kinds of returns can we expect?

DV :Ho Chi Minh City is expected to offer a cyclical recovery with structural catalysts and I predict property price appreciation of 15% pa over the next 3 years, along with 6-8% pa rental yield. Therefore, one could expect +20% annualised returns. This yield is a base case scenario, and would only bring prices back to previous peaks and would arguably represent a more sustainable level given the improving economic activity and outlook.

Q3 :What is your view of commercial property?

DV :We like commercial property as it is expected to be a key beneficiary of the various economic improvements and increased infrastructure spend as well as urbanisation thematics. Once again, my preference is for HCMC, especially commercial and residential projects in Districts 2 and 9. We are also looking at the Thu Duc area in the east of the city to take advantage of the new infrastructure, accessibility and decentralisation of the CBD. Preference is for Retail and Industrial over Office, as we see better yields and less supply in these sub-markets. Ground floor retail looks most promising, given the significant trend of rising domestic consumption. Logistics Industrial also looks interesting, especially near the growing port areas. And we believe both these sub-markets can deliver almost double digit rental yields, in the right locations.

Q4 :Are prices of Vietnamese property stated in USD or VND? Which takes precedence?

DV :Prices are quoted in USD and VND, but are physically transacted in VND. The VND is a managed currency and not yet freely floating. So, one must consider the currency risks when purchasing property in places like Vietnam. However, the currency, while steadily depreciating against the USD, is being managed with a lot less volatility than in previous years, highlighting the Government’s successful efforts to support the economic stability and growth of the country.

Q5 :What is the inflation rate like?

DV :With inflation down to only around 1% and lending rates down to 8% from double-digit levels in 2011 and 2012, Vietnam is on a much stronger footing. This has supported a recovery in the lending activity of banks and improved affordability in general.

Q6 :Is HCMC a place that’s really liveable with all that traffic jam, noise and large population?

DV :HCMC is a very liveable city with a rising demographic of young upwardly mobile, and forward-thinking population. While there are always traffic issues associated with large, fast-growing population cities in Asia, the new Mass Transit train network, freeways and ring roads will all alleviate the strong traffic growth expected in the city in the coming years. HCMC has a real “buzz” about it. Given its combination of great weather, low cost of living, and an exotic and rich culture, I expect Vietnam to become the next big Asian location for travel and retirement.

Q7 :Would it be easy for me to get a retirement visa or permanent residence if I buy property there?

DV :At this stage, no retirement visa scheme is available, and retirees living in Vietnam are required to make use of either long-term tourist visas, which are available for a maximum of 3 months at a time, or a 5-year long-term visa, which needs to be “checked up” and renewed at immigration offices every 3 months.

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Matthew Yeoh is Managing Partner of Yeoh Mazlina & Partners, a legal firm based in Kuala Lumpur.

WHICH COUNTRIES ARE STILL HOT AMID CRASHING MARKETS AND CURRENCIES?

Q :With all the talk about market crashes and depreciating currencies, which is a good country to buy property now, or should I wait till we see some signs of stability? My income is derived mainly from Ringgit Malaysia (RM) and I already have a property in Australia (AUD also depreciating).

MY :If you are a property investor, until very recently Malaysia was the best place to buy that piece of real estate. This is regardless of whether you are a local buyer or a foreigner. It offers the least restrictions for a foreign purchaser who can own almost any form of property in his own personal name, on top of taxes being reasonable and laws being very transparent.

Since last year, however, the economy of Malaysia has been caught in the “perfect storm” and the confluence of weak commodity prices, sluggish oil prices, the devaluation of the Chinese renminbi, the slow regional economic growth, the prospect of a rise in interest rates by the Fed, the poor perception of governance – all these have led to the ringgit falling off the cliff.

Thus, if you are earning your income in ringgit, you will think more than twice how best to preserve the value of your wealth and prevent it from falling further, and if you are also a real estate player, you will definitely consider where else you can park your wealth to hedge against any further loss.

I would advise a few relevant points to consider in investing in overseas real estate. I call it the ASTAR test:

A) Affordability

B) Strength of its institutions e.g. laws and enforcement agencies

C) Transparency

D) Accessibility

E) Repatriation and exit

The ASEAN region offers a couple of countries worth looking into at the current moment. After Malaysia, I would say that Vietnam now offers the most attractive investment options. Prices are still relatively affordable, it is easy to purchase properties and the capital appreciation prospects are very good with rental returns at about 8% per year. It is an emerging economy with the potential of a huge middle class population, a stable government and within a couple of hours’ flight away from Malaysia.

For those with a moderate to high risk appetite and have the holding power, this is a good country to buy real estate. But it has its downside too; laws are not very transparent, enforcement can be circumvented, and it’s still a relatively new player in the globalised real estate market so slip-ups are bound to occur now and then.

klThe next country nearby I would watch with interest is the Philippines. Although it has more restrictions than Vietnam in terms of the types of units one can own, it is still relatively simple to buy, say, a condominium for investment. Still, one has to be careful of the location because capital appreciation and rental returns vary very sharply between the more desired locations of Makati and Bonifacio Global City, and other parts. The main advantage is your investment will be acquired and dealt with in English. The Philippines recorded the highest GDP growth in ASEAN last year and it is finally waking up from its slumber.

Going further, to Europe, the UK has always been a great favourite for Malaysians because of historical ties. The UK has just come out of a recession. Elsewhere in Europe, the Iberian peninsula comprising of Spain and Portugal are also good buys, as the laws allow foreign ownership without restrictions. These two countries are clearly showing signs of economic recovery. Any buyers of properties in these two countries whose investment is at least EUR500,000 qualifies for the Golden Visa programme which gives permanent residency status and visa-free travel. It also entitles you to live in the Schengen area which is practically all of mainland Europe.

In my opinion, currently the best place for your bucks at this time has to be the USA. The country is coming out of its economic slump and after all it’s still one of the most, if not the most, powerful countries on Earth. More jobs data are reported every quarterly, consumer spending is on the rise albeit slowly, and comparatively property prices are still cheaper than all the European countries I mentioned above.

It has strong governance, everything is transparent and dealings are conducted in English; there is no restriction on foreign ownership of any types of real estate; no issues of repatriation of funds should you wish to exit later, and the seller always is obliged to take out an insurance policy of the property you buy at the point of closing. Risk is therefore very controlled.

The downside, if I may call it that way, is the distance involved to get there so you may not be able to view your investment or talk in person to your advisors such as property managers and lawyers, for more than once a year. Also the taxes are marginally higher than the countries mentioned so far, but with a good accountant, that can be minimized.

But the USA is for long term investors. Capital appreciation is not at the rate we are used to seeing here in Asia, but the best attraction is the rate of rental returns — you can achieve anything between 12% to 18% net returns a year depending on where your investment is (the USA is a huge country). You will get your returns in USD which is the de facto world currency of exchange even until today.