Financing in Niseko

The demand for property in Niseko continues to grow. 2007 saw the sale of a number of large tracts of land not just in Hirafu Village but also Hanazono, Higashiyama and Annupuri. This demand was driven partly by developers looking for locations for larger style destination resorts and individuals looking for an alternative to Hirafu Village. The apartment market continues to grow and rental returns have become less important as the demand for luxury apartments increases.

Obtaining finance for purchases in Japan is challenging, particularly for non-residents. Many purchasers of property in Niseko have simply paid cash or have financed their purchase by drawing down on the equity on their home or other assets. Paying Australian interest rates can be justified if your property is returning a capital growth rate greater than the effective interest rate.

In Europe it is now common to travel throughout the property markets of Europe and purchase holiday or investment property. They may often borrow against their existing home equity and use part or all of the property they are purchasing as collateral. They will be supported by their local pan European bank.

This practice has been less common for Australians as holiday homes in places like Bali or Thailand are subject to an unstable government, title uncertainty, and complex ownership structures. Japan has a system of title that is similar in structure to Australia’s torrens title system and is certainly less complex than European titles. The big Australian banks have been looking closely at the Niseko market and we anticipate that they may offer part financing of property purchases in 2008. The demand and opportunity for the Australian banks is simply too good to ignore.

Financing now

It is still difficult for foreigners to obtain financing through a Japanese bank, particularly without permanent residency. So how do you finance your purchase in Niseko?
Ideally a yen loan is the best way to purchase your property. Japanese interest rates are at historically low levels and many banks will provide a loan in Yen. However many people also finance their purchase in Niseko in their home country using their existing finance arrangements.
When you obtain finance outside of Japan it is not possible to use the Japanese property as collateral.

Australia

The NAB appears to be the most progressive at providing loans in Japanese Yen at Japanese interest rates.
The loan will be secured against a nominated asset in your country of residence. The asset should have a value of 120% of the amount of the loan and you should have a good relationship with the bank and a good income history. There is no centralised contact and we strongly suggest you discuss financing prior to coming to Niseko.

Hong Kong

In Hong Kong the Westpac and Commonwealth banks are the most progressive and will provide yen loans with the appropriate collateral depending on your financial situation. However they are not promoting these services and I have encountered clients who have had some difficulty in obtaining these loans.
The loan can be serviced in Japanese Yen through your Japanese income which will minimise your exposure to currency fluctuations.

ANZ Japan Expat Mortgage Summary

The Australian and New Zealand Banking Group Ltd (ANZ) have offices in Tokyo and Osaka, so are on the ground in Japan to assist with your requirements.
Their standard Expat Dual Currency Mortgage requires the borrower’s main source of income to be in Japanese Yen. For certain clients who are investing in Japanese property they are able to seek an exception to that requirement enabling ANZ to assist Australian (or other) tax residents. All clients need to provide an Australian or New Zealand property as security to release equity which can be used to purchase Japanese property.

• Offer JPY finance secured against approved Australian or New Zealand property.
• Offer JPY interest rates based on ANZ cost of funds plus 1-1.25% margin.
• Apply standard Expat Mortgage terms for Japan based investors.
• Consider Australian or New Zealand based applicants on a case by case basis.
• Provide a loan structure that generally allows for trusts and companies.
• Provide approval/pre-approval within 5-7 working days, followed by a 4-6 week settlement process.

by Ruskin McLennan

Ruskin McLennan is Managing Director of Niseko Property

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