Japanese real estate targeted by Chinese and Hong Kongers

Foreign companies and individuals in China and Hong Kong are targeting Japan’s real estate, including areas of forest and land with access to water resources in the Kyushu region, prompting concerns from local governments and residents.

The acquisition of forest land in Japan by foreign capital reached an accumulated 2,376 hectares from 2006 through 2020, according to the Forestry Agency. Hokkaido accounts for the majority of such investments, while Fukuoka Prefecture ranks fourth.

Purchasers come from a wide range of countries and regions, with China (including Hong Kong) topping the list at around 40% of the total with 969 hectares.

The Forestry Agency numbers do not account for private land sales, indicating that the data is just the tip of the iceberg. When it comes to private land acquisition, buyers in China and Hong Kong often target land in Japan.

Why are they attracted to Japanese real estate? And what does it mean for Japan?

As the trade conflict between the United States and China escalates and the Chinese government’s regulation on real estate speculation intensifies, Japan’s real estate has been drawing attention from wealthy Chinese as a low-risk investment with lax regulation. The fluctuation in real estate prices in Japan after the Tokyo Olympics and the large redevelopment of urban areas also attracts foreign land-buyers.

Some experts believe that the “shopping binge” could accelerate once the coronavirus pandemic is over.

The Chinese media reported survey data in May from the largest online real estate company in Asia stating that 27% of Chinese investors currently plan to buy real estate overseas in the next two years, while 47% said they may check out real estate when they travel overseas after the COVID-19 pandemic settles down. According to the survey, Japan ranked as one of the top destinations for such overseas trips.

There are several websites in China that allow users to search for Japanese real estate, and one of the largest, Shenju Miaosuan, lists 64 investment properties in seven prefectures in the Kyushu region.

The Nishinippon Shimbun has confirmed purchases of privately owned land in Kyushu made by companies and individuals in China and Hong Kong, including a natural spring in Kumamoto Prefecture and a quasi-national park in Fukuoka Prefecture.

Suizenji Ezuko Park

Suizenji Ezuko Park in the city of Kumamoto, home to abundant high-quality water resources from within the aquifer under the Aso area, was sold to a Chinese national within the past few years.

A Japanese national, acting as a mediator, contacted the park’s landowner after he acquired it in 2016, saying a Chinese person was looking for land in Japan.

The landowner sold part of his land — an area of about 1,300 square meters — for about ¥200 million in around 2019. The transaction price was believed to be higher than the market price.

Based on the registration details of the new landowner, a Nishinippon Shimbun reporter visited the 14th floor of a building in Beijing where a real estate investment company specializing in land with water resources is housed. Only tenants and staff were allowed in the building, and phone calls to the company inside were cut immediately after they were answered.

According to the former landowner, a “villa complex” is to be built on the land. Local residents believe that the real target is groundwater in the area, noting that once digging starts ground water will gush from the natural springs and aquifers.

“This is a natural asset that has been protected by citizens for ages,” one local assembly member said. “We are worried that it will be recklessly pumped away.”

Under the Civil Code, the ownership of underground resources is interpreted as belonging to the landowner. According to the city of Kumamoto, the city ordinance requires landowners to notify the city if they install a facility for water intake, but there is no restriction on the amount of water it may take out.

The lack of clear information about what the new landowner plans to do with the land is stoking fears locally about environmental damage.

“We were surprised to learn of the acquisition by the Chinese investor,” a city official said. “At present, we have no choice but to keep a close watch on the situation.”

Koinoura Garden

In December 2018, a Hong Kong-based drinking-water manufacturer acquired the 55-hectare Koinoura Garden inside the Genkai Quasi-National Park in Fukutsu, Fukuoka Prefecture. The land also includes the Speed Park Koinoura racing circuit.

A source well-versed in the purchase said officials from the Hong Kong manufacturer showed a blueprint of a vast resort development plan.

“I think their common sense and rules differ from ours,” said the source, who asked not to be named. “I can’t sleep at night wondering if the development will take away (the racing circuit).”

The source suggested that there may have been some lapse in the legal system that allowed a foreign company to purchase land inside a quasi-national park.

When the city of Fukutsu learned of the proposed development, they consulted the Fukuoka prefectural authorities and were told that a large-scale facility cannot be built because the site is a quasi-national park.

The city has been visiting the site regularly to monitor the situation, but there have been no signs of development or resale of the land.

Keeping track of landowners

Some countries, including China and the Philippines, do not permit foreigners to own land. In the U.S., there are regulations on land acquisitions that differ by state, and in France, transactions of a certain scale of land require prior notification.

Experts say that Japan has loose regulations on foreign investment in real estate and that further discussion is needed to accurately judge the status of land and whether revisions to existing laws are warranted.

In June, a new land use regulation law was enacted that allowed the government to collect various information such as landowner titles and land usage activities around facilities deemed important to national security.

On the local level, Hideki Hirano, a special-appointment professor at Himeji University who is well versed in land acquisition issues, is concerned that the increase in resale transactions of land between parties in foreign countries could make it more difficult to “pin down the landowners.”

At present, it is difficult enough to pin down domestic landowners, let alone foreign buyers.

An amendment to the Real Property Registration Act and the Civil Code, which is slated to take effect by 2024, will finally make inheritance registration obligatory, allowing authorities to keep track of intergenerational land transactions.

However, if the party is overseas, it will not be subject to this particular legislation. If the land is resold, “it will make it impossible to identify the real landowner, which could hinder the utilization of the land and make taxation difficult (for local governments),” Hirano said, adding it could also hamper disaster recovery work.

“In some cases, acquisitions are made through Japanese companies, and it is difficult to track all cases,” said an official at the Fukuoka Prefectural Government’s policy planning division.

This section features topics and issues from the Kyushu region covered by the Nishinippon Shimbun, the largest daily newspaper in Kyushu. The original articles were published Aug. 29.