by Mick Baker
Founder of Hakuba Real Estate.
Your Real Estate Investing for Dummies guidebook will tell you that once a location has experienced a rapid increase in price, you should look for other areas nearby with similar attributes that have yet to boom, and invest. Whether or not you have missed the boat in Niseko is a matter of opinion, but many investors are beginning to look further a field in Japan to other resorts that are yet to boom. During the Japanese economic bubble of the 1980s, the ski business also went through a massive boom. As Japan is 80% mountains it has an amazing array of skiable terrain and new ski resorts were erected all over the country. Even celebrities were building ski resorts. After the economic bubble burst, and in the ensuing 15 years, most ski resorts have experienced economic decline. Currently the ski resort business in Japan is undergoing a period of consolidation, with the better resorts becoming stronger and the smaller resorts closing. There are now numerous ski ‘ghost towns’ that have lifts and hotels in place, but where the operating companies, tired of losing money, have simply walked away. It’s estimated that only 5% of ski resorts in Japan are profitable. So which resort will be the next to experience a rapid increase in land prices? There really are only a few candidates: in Hokkaido Furano and Rusutsu; and on the mainland Yuzawa, Nozawa Onsen and the resort that is commonly known as the best on Honshu (the main island), Hakuba.
Hakuba was host of the 1998 Winter Olympics but that didn’t have the expected positive long-term effect, and property prices continued to fall once the Olympic bandwagon moved on. Hakuba is a collection of 12 resorts located in the Japan Alps. With more steep mountains than Niseko and multiple resorts with an abundance of quality snow and variable terrain, it’s suitable for kids to extreme skiers. With a noticeable steady increase in foreign tourists over the past three years, many investors are moving into Hakuba real estate. Tokyo, Nagoya and Osaka ‘ski-changers’ and expatriate land-speculators have led the early charge. Even though land prices have followed the national trend and been declining for 15 years since the unrealistic bubble prices, the buy-in price in most areas of Hakuba is still considerably higher than Niseko was when foreigners started to purchase frantically a few years ago. The other factor that has held back Hakuba prices somewhat is the abundance of available land within the vast valley. There are about five or six village communities within Hakuba that are individually the size of Hirafu, and your Real Estate Investing for Dummies will probably also tell you that it’s generally scarcity of land that really pushes up prices exponentially. The key to investing in Hakuba is choosing the micro-area that will become the most desirable place to stay, not only close to the lifts, but with a infrastructure that has potential.
Hakuba experienced much more growth and rapid increase in prices during the 1980s from the domestic market than Niseko, hence the ensuing fall hit the area harder. So the key question is, will the international investment in the area be substantial enough to reach those values again?