Real Estate News | Asia Pacific Commercial News
Buying Land Cheap for Water Rights is Now Big Deal in Japan
By Alex Finkelstein | November 12, 2012 11:11 AM ET
China is leading the pack of foreign investors attracted to Japan's low-priced land availability these days. Japan's real estate prices have slumped for the last 20 years. Now investors see a niche in buying forest land with water rights at bargain prices. They see a niche because Japan has lax land-buying rules and an incomplete land registry.
According to Japanese government sources and various media reports, some areas of remote woodland in Japan can be bought for 60 U.S. cents a square meter (10.76 square feet) including groundwater. Japan is the only country in the Asia-Pacific region that doesn't regulate property investment by foreigners.
According to a United Nations report in August, Japan, whose population is shrinking, ranks in the top 10 percent of countries by water resources, while China and India, with the opposite demographic trend, will face shortages from 2030.
HSBC Holdings Plc (HSBA) said in a Sept. 12 report almost half of China's economy is already based in water-scarce regions.
According to Hokkaido government data, the biggest rise in forest purchases by non-Japanese is in Hokkaido, Japan's northern island that is about the size of Austria and has triple the average water reserves of other Japanese prefectures. It has about 60,000 square kilometers (23,170 square miles) of forest, a quarter of the nation's total, and supplies 20 percent of Japan's food.
Business Week reports that while the relative size of land owned by non-Japanese remains small -- 3,700 hectares (37 square kilometers) -- almost a third of it is on Hokkaido.
According to local government data, the island attracted 90 percent of forest purchases and non-Japanese investors bought 20 times more land in Hokkaido in 2009 than two years earlier,
In an Oct.18 Tokyo press conference. Hokkaido Governor Harumi Takahashi said she was concerned on the rush by foreigners to buy forest land with water rights because the government didn't know what development plans buyers might have. She said Japan always welcomes investment from local or foreign investors but needs to ensure proper use of water resources.
According to Masayuki Mitobe, head of water and land economic research for Hokkaido's government, China leads the purchases of Hokkaido forest and water rights with 21 transactions out of a total 57 sales.
Hong Kong buyers using Virgin Island-registered offshore companies accounted for another nine and Singapore investors eight. He said he could not name the investors due to privacy laws.
Business Week reports Go Okazaki founded the Tokyo-based Standard & Initiatives Properties three years ago to invest in forest land.
He said, "Japan's land is cheap. The water business is quite easy to get into and from a commercial standpoint, it's a limited resource."
The investor added, "Given current prices and the closed nature of Japan's timber market compared with North America and Russia, it makes sense to buy forest for water resources. The cost of cutting trees and reforestation is almost three times the timber prices."
A square meter of forest land sold for an average of 47 yen (60 U.S. cents) in March, compared with a peak of 89 yen in 1983, Japan Real Estate Institute noted in a September report.
"What water volumes you'll get and how deep you'll need to drill depends on the place," Okazaki said. "But if you dig you're bound to strike water anywhere in Japan."