Reason 4: Inflation Hedge
During inflationary periods, the value and purchasing power of fiat currencies such as the Yen decreases.
On the other hand, the value of real assets such as property increases, thus making real estate a good inflation hedge. With Japan seeing four-decade-high inflation in 2022, moving to real assets becomes more attractive than sitting in cash.
Owning investment real estate also provides a stream of rental income, which can also serve as a hedge against inflation. As inflation increases, the rental income generated by the property is likely to increase as well, with higher rents helping to maintain the value of the investment.
Reason 5: Leverage
Leverage in real estate refers to using borrowed funds or financing to purchase an investment property. The idea behind leveraging is to use a relatively small amount of capital to purchase a property and then use the income generated by the property to service the debt while the property increases in value.
Leverage allows investors to increase their purchasing power and acquire larger and more valuable properties than they could with their funds alone. Using leverage, investors can earn a higher return on their investment by amplifying the gains made from the property’s appreciation and rental income.
Leverage is another key benefit of investing in real estate. Japan’s low-interest rates and high loan-to-value ratios make it easier for investors to borrow money to invest in real estate, potentially increasing their returns. However, investors should carefully consider their risk tolerance and ability to repay loans before taking on significant amounts of debt.
Please note that property is generally available only to Japan residents with a steady income in Japan. Also, having permanent residency will give you better borrowing opportunities. If you are not residing and working in Japan, real estate purchases will be cash-only.