Niseko Powerhouse Investing FAQs

Q1. Can overseas residents purchase property in Japan?
Can overseas residents buy property in Japan? Do I need a visa?

Yes, overseas nationals can legally buy land in Japan without restriction and permanent resident status is not required. Most overseas buyers in Niseko have bought their homes on a short-term visitor's visa.

 

Q2. What do Australian banks offer in the way of finance for foreigners investing in Japan?
Loans using Australian property as security are available from a number of lenders and interest rates are typically under 3% pa.

The Commonwealth Bank (CBA) and National Australia Bank have been working to introduce Japanese yen loans to non-Japanese borrowers using Japanese property as security. While most of the major Australian banks have Japanese yen loans, none have been willing to take Japanese property as security and instead have required mortgages over Australian property… until now.

The CBA recently launched a new Japanese yen loan for up to 50% LVR (loan to valuation ratio) on the bank valuation of a Japanese property being bought. The interest rate is 3.95%.

The CBA have already approved the Niseko Powerhouse as a development that they would finance for investors, provided they meet their general lending criteria and subject to final valuations.

 

Q3. What taxes should I be aware of?
The property manager for Niseko Powerhouse will assist in preparing your taxes and will act as your tax agent where required by law.

The following is an overview of the taxes related to buying, selling and letting property in Japan. Please note that this is our understanding and is not intended to be advice. We strongly recommend that you seek your own professional advice.

Real Estate Acquisition Tax and Stamp Duty
A one off Real Estate Acquisition Tax is levied at 3.5% on the sale of non-residential properties or 3% for residential properties, based on government valuation, which is taken from registered council records, not the purchase price.

Government valuations tend to lag market valuations – by as much as 50% in some parts of the Niseko-Mt. Youtei area at the time this document was prepared. Stamp duties are also levied on property sales contacts but they are small and the maximum duty is likely to be ¥180,000.

Fixed asset tax
Annual fixed asset (property) taxes are levied in Japan at a rate of 1.4% and are based on the size and the type of construction using government valuations. The first fixed asset tax installment after buying a property is calculated from the date of settlement until 31 December of the same year.

Under current Japanese law a local agent or resident must be nominated to collect fixed asset taxes. The Niseko Powerhouse property management companies offer administration of Japanese taxes. Ridgerunner will help you select a property management company.

Consumption tax
Consumption tax, Japan’s goods and services tax, is included in the sales price of the Niseko Powerhouse apartments at the rate of 5%.

Capital gains tax
Non-residents who sell property within five years of purchase are taxed on capital gains at 39%. After five years this rate drops to 20%. Please note that because of the tax treaty between Australia and Japan you will get a credit for this in Australia from the Australian Tax Office (ATO).

Taxation of rent and personal income
Non-residents who earn rent on properties are required to file an annual income tax return. Taxes can be offset by accelerated depreciation expenses in the first five years on new properties, interest payments and travel expenses.

Annual travel expenses to Hokkaido to inspect your property as part of your holiday can be used to offset income tax.

Withholding taxes
On some occasions a 10% withholding tax when properties are sold and payments are made from Japan to on overseas bank account. However, Japan has tax treaties with most industrialised nations that prevent double taxation of income earned in Japan.

 

Q4. What is the title to the Niseko Powerhouse apartments?
The apartments are sold with strata title.

The Niseko Powerhouse resort consists of a hotel and apartments. The resort operates as follows:

Management association: The resort complex will be controlled by a management association to be formed under Japan’s Kanri Kumiai (hotel operating) regulations. The association is similar to a body corporate; each apartment has set voting rights and contributions towards association costs based on the total floor area of the units.

Management board: The management association will elect a board. The board will be responsible for appointing an association manager to undertake the day-to-day running of the association and oversee the resort management contract.

Resort management contract: The management association will enter into a resort management contract with a management company to maintain, operate and manage the resort on behalf of the members. The interim manager is the owner of the Powerhouse Hotel.

Resort management contact term: The resort management contract will have a three-year term with right of renewal.

Apartments available to rent: Apartments will be constantly available for rent by the resort manager, except for days allocated to the apartment owner. The management company will receive a commission on all rentals.

Owners’ use: Owners’ may use apartments for up to five weeks (35 days) in any year. Apartments may be used for up to two weeks (14 days) between 16 December and 31 March and for up to three weeks (21 days) between 1 April and 15 December. A charge will be made for laundry and cleaning during periods of owners’ use.

Pooled rental: Rents on all apartments will be pooled and expenses deducted. Total rental net of expenses will be divided between apartments based on a formula that takes into account rack rentals for the different apartments. The Powerhouse Hotel will operate as a separate business and will be excluded from the rental pool but will pay its share of the management association expenses.

 

Q5. How does the sales process work?
The process of buying property in Japan and Hokkaido is similar to Western countries. One major difference however is that real estate agents in Japan often handle many of the functions performed by lawyers (such as requisitions on title and contract preparation). Also all real estate companies must be licensed by the Japanese government to buy and sell property. RidgeRunner is a certified real estate agent (Governor of Hokkaido, Region 1, Shiribeshi, 324).

Below is an outline of the sales process for the Niseko Powerhouse:

• Prospective buyers reserve units by filling in an application form (available on request) and transfering a refundable application fee of ¥400,000 (A$4,000).
• A full sales package containing contracts, management association and resort management contract will be sent to the applicant for review.
• All prices include consumption tax and commission but exclude standard buyer’s costs. Your real estate agent will provide more details.
• Up until formal contracts are signed, both sides are free to withdraw from the process and application fees, less bank charges, will be refunded
• Once the buyer and advisors are satisfied a formal contract will be entered into. 
• The contract is a construction contract and includes progress payments.
• Progress payments are required by the following dates. These dates may vary according to the construction schedule; your real estate agent will provide details.
  

  Phase	Date	Payment (%)
  Contract signing Construction starts Roof complete Handover	--- August 2008 December 2008 February 2009	7.5% 12.5% 20.0% 60% (Balance)

 

Q6. How do local people feel about overseas investment?
Local government representatives and the community welcome overseas purchases of property. Western tourism and investment to Niseko has brought an unexpected prosperity to the area which has been welcomed with open arms.

The mayors of Kutchan, Hiroshi Ito, and Niseko Ryuichi Sato are actively promoting investment and assisting overseas investors. The Niseko council has set up a unit to coordinate development of the resort and provide English-speaking local government contacts.

 

Q7. Can I let my property during the summer?
Far more tourists visit the Niseko-Mt Youtei area during the spring to autumn periods than in winter so RidgeRunner is designing the Niseko Powerhouse for all four seasons. That includes installing heating systems that can double as air conditioning and including features such as balconies, terraces and patios. We recommend you spending some time in Niseko outside the winter months to ensure you make the most of your investment.

 

Q8. What is a Tsubo?
A Tsubo is a measure of land and area in Japan, one tsubo is the equivalent of 3.33m2. This term is used in the measurement of land and buildings. You will commonly hear of the ‘’price per tsubo’’ which is the common currency of land values in Japan.

 

 Q9. Are the apartments sold furnished?
Apartments will be finished to resort standard with all furnishings, fittings and inclusions suitable for rental.
 

This information is intended as a guide only. Landlord Central highly recommends that you seek the services of financial and legal professionals to verify this information. No liability can be implied against Landlord Central regarding the provision of this information.