Niseko - How to Invest Wisely

The recent development of Niseko started around 2004 as international investors started realizing the potential of a quiet ski resort in Japan that routinely receives more than 15 metres of "champagne" powder snow per season.





In the short time from then to now, the area has seen a development boom with hundreds of new properties from middle range to high-end luxury. The property boom peaked in 2007/2008 when prices near the Hirafu ski hill were more than 10 times the price of 2004. The financial crisis cooled interest in the area with a 10-20% drop in land prices. Due to investments from global heavyweights such as Hilton, PCPD, Capella, and more recently Malaysian YTL, Niseko weathered the storm well and the boom is gaining pace again. Land prices have stabilized and everything is set for another flurry of development.





What are the investment choices?


In Niseko, there are a several choices for investment and these depend largely on your goals. Some investors are happy just to secure their own piece of Niseko. Others desire a yearly rental yield and some are keen for capital growth. Of course, there are many that desire a little of all these.





Land


Much of the profit made in Niseko has been based on the phenomenal capital growth of land value coupled with the price difference between the domestic and international markets. Due to the explosive growth in Niseko, land values in many areas still vary significantly. Buying a good piece of land cheaply and selling immediately for profit is still a valid investment proposition. This kind of investment is speculative and comes with inherent risk but there is good profit potential. When buying land, it is key to make sure the land has something magical: great views of the mountains or the ski hill, a river running alongside the block, beautiful trees or a fantastic location near the ski hill. This ensures that the block will retain its value into the future.





It is also critical to understand that much of the value in Japan is in land, not in property. Buildings have a recognized depreciation schedule in Japan whereas land value is based on recent sales.





New apartments


Much of the development in Niseko has been apartment complexes although it is worth noting that there is still a good supply of apartments on the resale market so resale values have remained similar to the original sales price. In addition, apartments on strata titles do not allow for much growth in land value.





Condominiums in Niseko are a wise purchase for the conservative investor as they provide a steady rental yield and owners can save money on their own trips by utilizing their property. Prior to purchasing it is vital to research the management company and the realistic gross and net returns. It is worth noting that holding costs are high in Niseko and there is strong competition for bookings.


With rental yields, occupation rates are critical and location is without doubt the major factor to consider. As a general rule, the closer to the ski hill the better. Opportunities to buy ski-in ski-out are limited due to lack of suitable developable land. However, these properties are probable the wisest investment choice.


It is always wise to compare any new development to the cost of similar properties on the resale market – there are often very good deals available.





Land and house


For investors looking to satisfy all the criteria above, land and house packages are a smart investment. Freehold land title allows for capital growth based on land values and the property can provide a steady rental yield. As a general rule, the rental yield decreases in parallel to distance from the ski hill although this can often be offset by properties with their own vehicles or in house staff to taxi guests to the ski hill. One key factor is choosing the right company to manage the property in your absence.





Resale market


There is still a good supply of properties on the resale market and this is where some of the real bargains are to be found. There are also many Japanese properties on the resale market to be found in the areas surrounding the ski hills that can often be purchased up to 50% of the build cost due to depreciation. If your investment goal is lifestyle driven, this can often be the best place to look. With careful renovations, an old Japanese property can also become an attractive proposition on the international market.





If you need more advice on your investment in Niseko, contact a reliable Niseko real estate agent. Niseko Consulting has provided impartial advice and fantastic investment opportunities to hundreds of clients looking for Niseko property.