Japan Redux?


By lostand confused   Follow   Mon, 7 Jan 2013, 2:36am   458 views   7 comments
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http://www.doctorhousingbubble.com/japan-real-estate-bubble-home-prices-back-30-years-zero-percent-mortgage-rates/

Hard to believe that this happened 23 years ago but real estate prices in Japan are now at levels last seen in 1983. In other words, thirty years of virtually no real growth in real estate values. In a system conditioned by inflation this is a perfect example of asset deflation. Many simply assume that real estate appreciation is going to happen one way or another but we are now following a low rate policy similar to what the Bank of Japan did with quantitative easing. 2012 is not a good example to set a baseline for a trend because...

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  1. Goran_K


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    1   9:46am Mon 7 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    Yup.

    Rather than face the music, it's going to be a drawn out crawl to the bottom.

  2. Nobody


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    2   10:53am Mon 7 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    lostand confused says

    we are now following a low rate policy similar to what the Bank of Japan did with quantitative easing.

    OK, but the scale in which we did QE is no where near what the bank of Japan did. The Bank of Japan's QE was small and ineffective. The Bank of Japan was filled with chickens scared of uncontrollable inflation. The current prime minster has pledged to implement unlimited QE. And you should then know what has happened in the last few days.

    And our real estate will never lose so much value, because we have Chinese investors and immigrants. Especially now in California, because the real estate bubble in China ended.

    Oh, by the way, for the ordinary American citizens, sorry to tell you this, but you are once again priced out of owning your home.

  3. lostand confused


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    3   11:05am Mon 7 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    Well, yes this time it is supposed to be different. Before the Japanese were buying up all the real estate, now the Chinese.

    The FED has just announced that it is planning on ending QE by end of this year-now for the FED, even announcing such a thing is blasphemy. But their balance sheet of junk debt is going up by leaps and bounds. We have been gaining jobs steadily, but not wages.

    2012 was a nice bounce, but lets wait and see. I don't think the fat lady has sung yet. I have no skin in the game, except that I want to buy. But current LA prices no way. But that is just me.

  4. gbenson


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    4   2:29pm Mon 7 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    The one comparison that I haven't seen yet in Japan is a chart of rental rates vs property values.

    I know now in Japan it costs about half as much to buy as rent at today's new low prices, but that's with a 35 year mortgage and stupidly low interest rates, which means that at current pricing, its still not as 'cheap' as US properties are. (In our area right now its about 0.4 for low end properties and 0.5 on mid-range properties)

    The US won't fall below the point at which investors can make a tidy profit. Japan can still fall farther before it gets to that point.

  5. thomaswong.1986


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    5   8:04pm Mon 7 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    if Interest tanked.. prices certainly didnt skyrocket. So it costs only $408K to buy a home in Tokyo or $239K in Osaka.

    Oct 10, 2012

    Japanese house prices continue to fall

    http://www.globalpropertyguide.com/Asia/japan/Price-History

    House prices in Japan have continued to fall, as the country’s recovery fades due to weakening exports, the appreciating yen, and deflation.

    In Tokyo Metropolitan Area:

    The average price of new condominium units dropped 5.1% y-o-y to JPY691,000 (US$8,894) per square metre (sq. m.) in August 2012, based on figures released by the Land Institute of Japan (LIJ).

    The average price of existing condominium units dropped 3.3% to JPY380,000 (US$4,891) per sq. m. during the year to August 2012, its 14 consecutive month of annual price falls.

    The average price of detached houses was down by 1.7% to JPY31,770,000 (US$408,901) over the same period.

    In Osaka Metropolitan Area:

    The average price of new condominium units fell by 3.2% to JPY457,000 (US$5,882) per sq. m. during the year to August 2012.

    The average price of existing condominium units fell 1.6% to JPY239,000 (US$3,076) per sq. m. over the same period.

  6. thomaswong.1986


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    6   8:07pm Mon 7 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    gbenson says

    The one comparison that I haven't seen yet in Japan is a chart of rental rates vs property values.

    rent is lower than buying ...

  7. gbenson


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    7   10:38pm Mon 7 Jan 2013   Share   Quote   Permalink   Like   Dislike  

    Thomas, thanks for the chart, I looked but couldn't find one. That one differs from what I found (which was limited a few discreet data points). If it costs $1100/mo to buy a place that rents for $1250/mo, then Japan prices have much farther to fall. No investor in his right mind would buy with that kind of ROI.

    The place I am currently purchasing would cost $600/mo if I had financed it at current market rates, and it rents for $1100. US prices simply won't go much lower when there's that kind of profit to be made unless the inventory fairies work overtime and start dumping hundreds of properties into a local market. Ya right!

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