The Wall Street Journal printed an in-depth take on this argument pro and con, with detailed and well-sourced points of view from both Eric Lascelles, chief economist at money management firm Global Asset Management (pro buying now), and Gary Shilling, president of A. Gary Shilling & Co., an economic consulting firm in Springfield, N.J. (con buying now).

Their arguments in a nutshell:

Mr. Lascelles: ”Investors understand that this is the mother of all buyer’s markets, and won’t last forever.” Conditions are amazing with low interest rates that can be locked in for the life of the loan, ample supply and low prices in most markets. Because investors see this opportunity, they’ve been gobbling up properties for themselves. The open window for average home buyers won’t be there long.
 
Mr. Shilling: ”Buying a house now would be a disastrous investment if prices fall another 20% or more.” The problem is excess inventories, which will continue to pull prices down. Shilling and his associates have calculated an excess of 2 million housing units in the market.

What’s missing here is a deep discussion of the psychology of homeownership, which can’t be dismissed. If renters have it in their heads that they want to buy a home at some point in their lives, they’re most likely going to lean toward Mr. Lascelles’ view of the current real estate market. Why not buy now, when conditions are so good? And with investors increasingly taking up more share of the homes being sold each month, there is a sense of urgency that the days of buyers’ favor won’t be here forever.

What’s also missing is acknowledgment of the completely individualized situation in each local market, and each household. These high-level arguments are interesting, but unfortunately are meaningless to most of the people sitting at kitchen tables making the decisions to buy or not buy. What goes into those decisions revolves much more around the family finances, job outlook, and neighborhood housing market. Sure, savvy buyers will be reading the news and keeping up with how the overall market is moving. But, at the end of the day the national market forecast and economic indicators are not something you see on the average family’s “back of the napkin” short list of considerations for whether to buy or not to buy.

Real estate is local, and individual. Because of this, many attempts to “time” the market by entering at just the right time are either subjective or futile. Buyers are much better off timing their decision with what fits with their own lives.

Real Estate Japan Note: This article is by Gino Blefari, CEO of Intero Real Estate. Intero is a Real Estate Japan partner and the leading realtor in Silicon Valley.

A Japanese government panel announced the possibility of power shortages in the country this summer, especially now that operations of Japan’s 50 reactors have been suspended due to safety checks.

According to a draft report released on May 12, Kansai Electric Power Co. (9503) may face the largest power shortage of 14.9%. Utilities for Kyushu and Hokkaido also fear that they will struggle to provide enough power, with Kyushu Electric Power Co. to face 2.2% and Hokkaido Electric Power Co., 1.9%.

The report cited that the government is analyzing its electricity forecast as they take into consideration the first reactivation of the atomic reactors that were temporarily stopped for safety reasons since the Fukushima disaster in 2011. Because of this, government measures to save energy over the summer are expected to be drawn up.

It was also cited that power utilities could meet the minimum required supplying capacity for the summer, which is at least 3%, enabling them to avoid strict power cut. Tokyo Electric Power Co. as well as four other utilities are expected to meet the mark.

But the Kansai area will be greatly affected by the current limited power-generating capacity of the Kansai Electric Power Co., which had long heavily relied on nuclear power. To prepare for this, the panel suggested that the government set power-saving targets across Japan, and utilities with excess capacity should help supply electricity to other areas.

The Yomiuri newspaper reported on May 12 several ways to evenly supply Japan’s regions. It states that the government may seek the help of the Chubu Electric Power Co., Hokuriku Electric Power Co., Chugoku Electric Power Co. and Shikoku Electric Power Co. to reduce power consumption by 5%, so that the reduced energy could also be supplied to the Kansai Region. The newspaper also stated that citizens may help conserving energy by as much as 20%, while Kyushu and Hokkaido may contribute by reducing power consumption by 12%.

Japan’s 50 reactors are currently suspended due to safety checks or yearly maintenance. But efforts to restart the reactors failed to reach a consensus with local residents. Because of this, the use of thermal power plants increased which according to the panel, if done continuously, could drain the country’s finances.

Power utilities spent about 3.6 trillion yen on fuel costs in the year ended March 2011. According to the report, fuel costs may increase from 5.9 trillion yen to 7 trillion yen ($88 billion), and could mean higher electricity bills for households and companies in Japan. In relation to this, Tokyo Electric (Tepco) has already requested Japan’s ministry of trade and industry on May 11 to increase electricity rates for households by an average of 10.28% starting July 2012.

Photo Credits: mvdelrosario217 via Flickr Creative Commons

Japan Inc. however believes that inflation might be a saviour for the stagnating economy. But what Japan usually ignores is the fact that deflation is not the cause of its problems. Firms and consumers have no confidence in the future and so prices grind lower. But to Nicholas Smith, deflation has a silver lining in itself somewhere.

He explains that Japan has proven that deflation could be a workable condition. England had deflation of 0.4 percent a year for the whole Victorian Golden Age of the 1800s and yet, the country has flourished. And just like England, the U.S. has also experienced deflation and the technology sector has had it forever.

But for most economies, deflation can be critical; it can thump financial assets, boost debt-servicing costs, pull down corporate profits, lower government tax revenue and affect confidence. Investors consider deflation a controversial issue and avoid any economy battling it. But despite all these, Smith believes deflation has helped corporate Japan in unpredictable ways. It has helped by encouraging mergers, decreasing the number of uncompetitive industries and creating investment opportunities.

With this, he advises investors to focus on companies that have atrack record of thriving on deflation.   Japan is indeed famous for holding on to dead companies, banks and industries for far too long.  There are Japanese entrepreneurs who believe that the country still has the ability to grow economically and Smith advises investors to focus on the younger, newer Japan Inc. crowd.

Businesses like Seven & I Holdings Co., discount retailers like Don Quijote Co. and online shopping outfits like Rakuten Inc are but a few examples of some noteable investment opportunities that thrive in a recession.

Though Smith’s thoughts on deflation could get less votes among economists, it is an idea that could lead investors to think of more ways to help the economy flourish, instead of just drown in economic dilemma.

Photo Credits: christian.terboven via Flickr Creative Commons

Mitsui Fudosan laid out its plans to expand its presence in Europe, setting sights on London’s strong real estate with a budget of 500 billion yen or $6.1B.

Hideto Yamada, head of Mitsui’s European operations, told the Financial Times that the Tokyo-based company plans to buy land in the U.K for new development along with existing offices and shopping centers.

Mitsui Fudosan has about $30 billion in assets and  $20 billion in an investment fund. And not only is the company targeting London, it also plans to expand to France, Germany and Spain. However,the company is taking a wiat and see approach to the continent due to the ongoign euro zone crises.  That said, Yamada mentioned that one day properties outside of Japan could make up a third of its revenue.

According to Yamada, the company doesn’t have any strategic plans in regards to timing but for Mitsui Fudosan.  Its about being ready for when the opportunities present themselves.

Photo Credits: Paul ‘Tuna’ Turner via Flickr Creative Commons

A survey by the Yomiuri Shimbun has found that foreigners hold as much as 1103 hectares (11.03 million sqm) of forestry in Japan. This number, however, is thought to represent just the tip of the iceberg as there are many cases of foreigners buying land and registering it in the name of a Japanese citizen or local company.

The survey was conducted between the end of March and the middle of April. The local governments across Japan’s 47 administrative regions were asked to provide information on the number of transactions, purchase price and total area. Under the National Land Utilization Law, any transactions of land over 1 hectare must be reported to the local government. The aim of this survey was to find out all other non-reported transactions.

In Hokkaido, a total of 1039 hectares, equivalent to the size of 51 Tokyo Disneylands, is held by foreigners or foreign corporations. This amounts to 94% total held nationwide. Approximately 70% of this land in Hokkaido is owned by Australian and other Asian nationals or companies. Several properties were owned by companies registered in the British Virgin Islands.

With growing concern over the true intention for the purchase of forest land by foreigners, Hokkaido and Saitama have introduced regulations that require buyers to provide advance notice to local government when purchasing land in a designated water-source area. Yamagata, Gunma, Fukui and Nagano are also considering introducing similar legislation.

However, there are many cases where the buyer has concealed their identity by using a Japanese name to register the title. A 40 year old Chinese man in Sapporo City purchased 14 hectares of forest near Niseko last Autumn, but registered the land in the name of a local Japanese real estate agent.

The buyer said he was afraid of locals protesting if they found out he had purchased the land. He believes the land values in Japan are currently at the bottom, so and he plans to eventually resell the land at a higher price. The real estate agency who sold him the land is based in the Kanto area. The agent said that although the buyer was not looking for natural water sources, they felt it would be best to register it in a Japanese name.

Between 2005 and 2010, foreigners had purchased 40 blocks of forest land with a total area of 620 hectares. This does not include transactions under 1 hectare (10,000 sqm).

Source: The Yomiuri Shimbun, April 26, 2012.

Editor’s Note: Zoe Ward is the publisher of Japan Property Central and has extensive experience in the Tokyo real estate market, working for some of the advertising agents on Real Estate Japan. Photos courtesy of Zoe Ward.

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Are you looking to buy property in Japan? Search Tokyo real estate for sale. Property for sale in Japan.

Editor’s Note: Real Estate Japan K.K. does not endorse the views expressed in any of the articles and the opinions expressed are solely those of the authors and publications included below. The links below are purely for informational purposes only. 

This is a weekly news summary taken from Real Estate Japan’s Twitter feed.  If you’d like to see these articles as they go online throughout the week, follow us on Twitter at “Real Estate Nihon”.

Let’s get started:

If Japan can have 200% debt to GDP: why not Europe, or America? (via The Royal Gazette Online)

If Japan can survive for a generation on 200 percent debt to GDP, why can’t Europe and America? Clem Chambers, CEO of ADVFN.com and author of titles including “A Beginner’s Guide to Value Investing,” explains.  Click here to continue reading.

In Europe, Parallels to Japan’s ‘Lost Decade’ (via CNBC)

Parallels abound between Europe’s current debt crisis and Japan’s so-called Lost Decade, when the Asian country’s economy imploded in the 1990s.  Both regions experienced real estate booms ahead of their financial crises, consumers took on large levels of debt and domestic banks built up unsustainable loan-to-deposit ratios as they sought to feed local demand for borrowing.  Click here to continue reading.

Prologis Considering Creation Of Japanese REIT (via The Wall Street Journal)

Prologis Inc. (PLD), the world’s largest public owner of warehouses, said Tuesday it may form a real-estate investment trust to be traded on the Japanese stock exchange amid growing demand for commercial property investments by Japanese investors.  Click here to continue reading.

Who you buy a home from can make a big difference in price (via Japan Times)

We met the real estate agent at Honda Station on the Sotobo Line in Chiba Prefecture. As we drove to the property we talked about the area. Though a typically cramped Japanese bedroom community, it’s a bit older than most, so the houses were more varied in shape and size, with wider spaces between them, not to mention the extra public park space.  Click here to continue reading.

If ever there was a fantastic time to buy a home, it’s right now. Never mind the fact that I head a leading real estate brokerage company. Let the statistics show you why now is your best bet to get into the housing market:
 
1. Home values are recovering
U.S. home values rose 0.5% from February to March, the largest monthly increase since May 2006, before values at the national level peaked, according to a recent report from Zillow this month. In addition, the company said in its home value forecast that it expects 19 of the 30 markets it covers will reach a bottom in values this year. Phoenix and Miami-Ft. Lauderdale are expected to see significant home value increases.
 
2. Interest rates are still extraordinarily low
The cost of borrowing is still extremely attractive for buyers who qualify and are ready for the financial responsibility of a home mortgage. Saying mortgage rates have hit a new “record low” has become a bit of a broken record. At an average 4.04% in the latest Mortgage Bankers Association survey, rates on the standard 30-year fixed-rate mortgage are almost too good to be true. While there’s no sign from the Federal Reserve that rates will increase significantly anytime soon, it’s definitely a great condition for buyers right now.
 
3. Multiple offers are back
Demand for housing is starting to outweigh supply in some markets across the country. We covered the return of bidding wars this spring in markets like Silicon Valley, Miami, Seattle and Washington, D.C. Even despite the presence of “war” like situations, multiple offers are once again a fact of life in markets with strong economies and job prospects.
 
4. Rents are rising with no end in sight
The median U.S. rent was $721 per month in the first quarter, up 5.6% from the same period a year earlier, according to the Commerce Department. Altogether, rental income has increased 12% in the year ended in March. In addition to rising rent, the supply of units is the tightest in more than 10 years, with 8.8% of units vacant in the first quarter. This at a time when the demand for rental units is at the highest in 15 years. This means more buyers likely will continue to jump from that tight market into owning while the numbers make sense.
 
As you can see, the buyer market is about to get more crowded than it’s been the last few years. These are each solid market forces that could push more and more buyers off the fence, creating more transactions and helping to lift home values this year and next. If you think you want to buy – or know buyers who are testing the waters – now is your chance to take advantage of prime home-buying conditions.

Real Estate Japan Note: This article is by Gino Blefari, CEO of Intero Real Estate. Intero is a Real Estate Japan partner and the leading realtor in Silicon Valley.

Developing green building with Stuart Kay from Project Group Asia from Real Estate Japan on Vimeo.

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