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Japan

Japan is made up of a chain of islands in East Asia . With a population of 127.1 million, Japan is the world’s largest and most tech advances producer of cars, electronics, and machine tools. While the country lacks most natural mineral and fossil fuel resources, it’s GDP of $4.9 trillion is 4th largest in the world. The GDP per capita in Japan is $38,731.

Doing Business in Japan (Outbound)

City Living

  • Small spaces: Condo/ Apartment Unit average is 484 sq ft and SFR average is 1302 sq ft.
  • 4LDK – 4 bedrooms with Living, Dining, Kitchen
  • Traditional meets modern; Similar to US
  • Take shoes off when entering
  • Tatami mats and shoji screens are common

Cost

  • Price of average condo is $5,000/m2  ( $470/sq ft)
  • Most people rent

Licensing

  • Licensing is required
  • Education: High school graduate; 2 years in business; Pass a national exam; Register with Government; Continuing education
  • One licensee can hire 5 non-licensees
  • Typically work for a company
  • Unlike the United States, Independent real estate professionals are not common

Organized Real Estate

  • National Federation of Real Estate Transaction Associations (NFRETA)
  • The Real Estate Companies Association in Japan (RECAJ)
  • The Association of Real Estate Agents of Japan (FRK)
  • All Japan Real Estate Association (AJREA)

Doing Business

  • Commission based
  • 3% + 60,000 yen  8% tax (regulated by the MTLI)
  • Both buyer and seller pay commission
  • Dual is allowed

MLS or similar system?

  • Reins System
  • Not quite the same; It’s not regulated enough for all listings to be listed.  
  • Pocket listings are common
  • Builders control the inventory
  • Must know trusted real estate professionals

Ownership

  • No restrictions for foreigners
  • Fee simple, Land lease, fixed term, severalty, Real Estate Investment Trusts (REIT), Joint Venture, Limited Partnership, Limited Liability Corp.
  • Land Registries required

Escrow?

Title Insurance?

  • No

Contract

  • No standard format
  • Must sign in Japanese with translated summaries
  • Hanko – personal stamp or signature affidavit to execute

Bank Account

  • Need to open an account in Japan

Taxes

  • Property Tax
  • Appoint Tax Agent to file property tax
  • Need Tax specialist or CPA

Challenges

  • Bilingual services are not dually available.  
  • Managing property can be challenging if you don’t speak Japanese
  • Need English speaking trusted agent
  • Obtaining Financing
  • Very few banks offer foreign national loan programs for US Citizen
  • Ethical standard & Professional Conduct

Opportunities

  • Tokyo Olympics in 2020
  • Internationalization of the Markets
  • Upcoming foreign investment and the related market change, increase in tourism
  • On-going new projects in the cities
  • Development of Mega Infrastructure

Things to know

  • Traditionally, Japanese people do not like to live in older homes or second hand used homes
  • Houses are rebuilt after about 20 years so they are built to last for only for that long
  • Home value depreciated in time due to depreciation of house (improvement) value.  ( Land value can go up)
  • Because there is no MLS system and many homes are sold in closed market, it is difficult to determine “Market” value
  • Currently: Market Value = Assessed value with cost approach — this is much different than in United States
  • The Japanese government is trying to change the valuation system working with various sector in real estate and financial services
  • Offer/Acceptance practice is very different – first come first serve.  No multiple offers!
  • Often listing price is set higher and negotiated lower
  • Get to know them before doing business
  • Many Japanese people prefer doing business with referrals
  • Be punctual and dress appropriately
  • Use Surname instead of given name
  • Bow instead of  handshake
  • Decision making takes time
  • “Yes” is not always Yes
  • Business Card Manner
  • Saving Face
  • Politeness is their nature
  • No is hard to say…
  • Hierarchy matters – Age, Title, etc.

Doing Business in Japan (Inbound)

Motivation to purchase:

  • Investment
  • Tax write-off
  • 2nd Home / vacation home
  • Relocation
  • Capital Gain
  • Work or Education

Money transfers

  • No restrictions

How to find REALTORS®

  • Internet
  • Referrals

Timeline

  • No multiple offers
  • Many are used to longer timelines

Do’s and Don’ts

  • Many Japanese people prefer doing business with referrals
  • Be punctual and dress appropriately
  • Use Surname instead of given name
  • Bow instead of  handshake
  • Decision making takes time
  • “Yes” is not always Yes
  • Business Card Manner
  • Saving Face
  • Politeness is their nature
  • No is hard to say

China

China is the fourth largest county in the world by size, and home to nearly 1.4 billion people. It’s economy, the second largest by nominal GDP, is a socialist market economy. The world’s fastest-growing major economy, with growth rates averaging 10% over 30 years. With unparalleled recent growth, China provides amazing outbound and inbound international real estate opportunities.

Doing Business in China (Outbound)

City Living in Beijing

  • Condo/apartment is usually 200-300 sq ft per person
  • Cost: $623/ sq ft  ($1.65/sq ft) as of November 2015

Licensing

  • Not Required
  • License Requirement was removed at 2014
  • Typically work for a company
  • Independent RE professionals are rare

Organized Real Estate

  • CREA — China Real Estate Association (CREA)

Doing Business

  • Commission
  • 2.2% commission + 0.5%(service fee, similar to escrow service)
  • Service companies are usually owned by real estate companies and are not neutral third party

MLS or similar system?

  • No — there are many small to medium size similar systems, but there is not a dominated one like MLS

Most people use brand real estate companies

Ownership

  • Lease Based
  • 70 years for residential & 40 years for commercial
  • Government owns the land

Escrow?

  • No — money transfer directly to Seller/Agent/Broker is typical

Title Insurance?

  • No

Contract

  • Standard format for new development only, but not is required for regular resale transaction
  • Written in Chinese
  • May need personal signature, stamp and fingerprint to execute legal document.  

Bank Account

  • Must open account in China

Taxes

  • Currently, only selected cities have property tax for 0.6%, such as Shanghai and ChongQing
  • When purchase a property in China, typical taxes and transfer fees are:
    • 3% Deed Tax
    • 1% Stamp Tax
    • 0.5% Transfer Fee

Challenges

  • Existing regulations and restrictions for foreign buyer who want to purchase real estate properties in China (For example: foreign individual can only acquire 1 property as primary residence, and has to show the proof he/she has worked in China for a year)
  • Culture Differences
  • Risk management in real estate transactions
  • Due to lack of escrow and title system, real estate transactions are not fully disclosed to both parties, such as fund transfer and title history. Both buyer and seller are exposed to very high risks
  • Buyers and sellers usually choose famous real estate brand instead of individual professionals

Opportunities

  • In Shanghai, the price index of existing houses rose by 8.31% (6.9% inflation-adjusted) during the year to October 2015, in contrast to a y-o-y decline of 0.17% (-1.84% inflation-adjusted) the previous year, based on figures from Ehomeday.
  • In Beijing, existing home prices rose by 4.9% in November 2015 from the same period in 2014, to an average of CNY43,349 (US$6,711) per sq. m., according to Century21 China Real Estate.
  • Visit the Global Property Guide for current market updates on China

Things to know

  • WeChat app is the most popular way to communication in China
  • Transfer funds out of China is still subject to $50K/person/year
  • China has seen extremely high levels of Smog air pollution in recent years
  • You can check the current Air Quality Index here.
  • Most common seen protection is N95 mask that you can find in Home depot, Lowes and online
  • Google , Facebook, Twitter, YouTube and many websites are blocked by China’s “Great Firewall”
  • San Jose Airport offers direct flights to Beijing
  • There is no personal checks in China. Cash, credit card, and wire are accepted payment

Doing Business in China (Inbound)

Motivation to purchase:

  • Kids Education
  • Diversify Assets
  • Immigration
  • Investment
  • Health Related (Smog)

Money transfers

  • $50,000 per person each year

How to find properties

  • Internet
  • International Property Expos
  • High-end Real Estate Service

How to find REALTORS®

  • Referrals
  • International Property Expos
  • International Real Estate Companies

Learning curve

  • Steep — In China, most of the due diligence work is done by buyers, so they usually do very thorough research and prefer to clarify every detail

Timeline

Short — demand in most of China’s major cities is very high, and buyers usually have to make decisions in a very short period of time

Do’s and Don’ts

  • Most Chinese are not used to hugs, just shake hands
  • Don’t be surprised if your clients take you to a luxury restaurant
  • A lot of the business negotiations are done over dinner instead of the office, so bring your contract and get ready to sign at any moment

Canada

Canada is made up of 13 provinces and has a population of 36 million. 12.34% of Canada’s value of GDP is real estate, rental, and leasing. While very similar to the United States, it is important to know what differences will affect you if you plan on doing real estate business in Canada.

Doing Business in Canada (Outbound)

City Living in Vancouver

  • One of the world’s cleanest cities
  • Old houses (50+ years), lots of new houses, Townhouses, duplexes, 4-5 levels condos, 30+ high rises, small city living, convenient transportation
  • All living space including basement are included in living square footage
  • High Rises
  • Very central, next to shopping centers, all long sky train and stations

Cost

  • Price of average home: SFR: Average >$1M,  TH:  Average >$600K, Condo: Average > $300K
  • Renting is also very popular because of unaffordable housing

Licensing

  • Required
  • Age Requirement 19+, pre-screening for criminal records, choosing a broker
  • Similar to US

Organized Real Estate

Doing Business

  • Commission
  • 7% on the first $100K then 3.5% on the rest
  • Seller pays for commission and the 2 agents splits

MLS or similar system?

  • MLS Listings
  • Similar to US

Ownership

  • No restrictions for foreigners, however, when you sell there is a capital gain tax and a clearance certificate must be filed as soon as you have a firm contract of sale
  • Freehold, leasehold, cooperative ownership, strata title, condo, detached house and townhouse
  • Land Title Registries required

Escrow?

  • Buyer to engage a lawyer or notary public to prepare the documents necessary to transfer the legal ownership

Title Insurance?

  • Not required, but recommended

Contract

  • Contact of purchase and sale
  • Can be Power of Attorney or signed overseas

Bank Account

  • Need to open bank account in Canada

Taxes

  • Property Tax
  • Either property manager or accountant to help take care of property tax

Challenges

  • Non residents can borrow up to 65% of the purchase price
  • Ethical standard & Professional Conduct
  • Some bank charge premiums on foreign deals

Opportunities

  • Extension of Skytrain into Coquitlam BC
  • Reconstruction of old mall (Brentwood Mall) into new high modern mall (similar to Vallco Mall)
  • Upcoming foreign investment and the related market change, increase in tourism
  • On-going new project in the city
  • Transforming cities

Things to know

  • There are more and more high rises being built along the skytrain extension project; Land is getting rare
  • Too many high rises condos, square footage per unit is getting smaller and smaller
  • New developers will announce their open sale date, all you need is 5%-10% down, then you will be able to purchase a unit that is not ready until 2-3 years later
  • GST will be added on all new houses or condo sold, so final price will be higher than the listing price
  • No GST will be added on secondary market houses/condo
  • Property Tax in Canada is not based on purchasing price, and it  is much lower than the United States
  • Interest payment on mortgage is not tax deductible unless it is an investment property
  • Property tax cost for investment and for personal owner is very different, it is much cheaper to own than to invest

Doing Business in Canada (Inbound)

Motivation to purchase:

  • Investment
  • Growing family
  • 2nd Home/ vacation home
  • Relocation
  • Capital Gain
  • Work or Education

Money transfers

  • No restrictions

How to find properties

  • Internet / open houses
  • Visit real estate offices
  • Contact agents

How to find REALTORS

  • Internet
  • Referrals
  • Local Advertisements

Timeline

  • 21+ days

Do’s and Don’ts

  • No pre-approvals required
  • Houses usually stay more than a week on the market
  • Pre Qualification is helpful, but not necessary
  • Can always negotiate in transaction deals
  • Any notary will be good to handle real estate transaction
  • Can ask for rebates or referral fees from agents

Mexico

Mexico, with a population of 119 million, is the world’s largest spanish speaking country. While agriculture remains an important employer, oil and gas make up a third of the government’s revenue. The North American Free Trade Agreement (NAFTA) makes Mexico highly dependent on exports to the U.S., and the downturn in U.S. business in 2001 resulted in little or no growth in the Mexican economy. As the southern neighbor to the U.S., Mexico is a very attractive area for real estate investment.

Doing Business in Mexico (Outbound)

City Living

  • Varies/depending on the region
  • Living room, Dining room, Kitchen, 1-3 baths
  • Single Family Home, Condos, Cotos, Multi-units, Haciendas, Ranchos
  • HOA apply to some cotos, condos & single family residence depending of the location
  • Modern, Spanish Style, Californian Style
  • Similar to US

Cost

  • Depending on the area, location, and state
  • From $150,000 US (Condo) up to $3,000.000 US
  • You can also find properties and pay with Mexican currency

Licensing

  • Required by region.
  • Each State has different requirements

Organized Real Estate

  • Through NAFTA agreements, the Association of Mexican Real Estate Professionals (AMPI) signed an agreement with the National Association of Realtors (NAR), the Canadian Real Estate Association (CREA), and the International Real Estate Association (FIABCI). These important national and international real estate organizations are working to achieve standardization of real estate practices and procedures throughout the world
  • The company you select to represent you in your Mexican property purchase should be a member of AMPI and for our purpose, also of Leading RE. Not only is the member required to operate under a higher standard of care, and to adhere to a code of ethics, but they also may have access to an increasing number of the properties available for sale through computerized databases

Doing Business

  • AMPI -MLS
  • Commission is set between 6-8% of the purchase price or sale of the property
  • 50/50 between buyer and seller pay commission
  • Dual is allowed
  • Commissions paid to real estate brokers by the seller

Ownership

  • The Mexican constitution prohibits direct ownership of real estate property by foreigners in the “prohibited zone”, a strip of land thirty miles wide along its seacoasts (Gulf of México and Pacific Ocean) and sixty miles wide along its borders with the United States, Guatemala and Belize, as well as the entire Baja peninsula. This is the reason for the bank trust, the “fideicomiso,” which has been established under the guidelines of the Mexican government so that foreigners may be protected in their property acquisitions.
  • Fee simple, Land lease, fixed term, severalty, Real Estate Investment Trusts (REIT), Joint Venture, Limited Partnership, Limited Liability Corp.
  • Land Registries required

Escrow?

  • In some regions

Contract

  • No standard format unless you are a professional agent or your brokerage registered in that region
  • Must sign in Spanish with translated summaries
  • The contract has to be notarized by a Notario Publico (Public Notary)

Bank Account

  • Paperwork required to open account: Passport, Proof of Address, Tourist Card or FM3 given on arrival in Mexico, 3 local references & 3,000 pesos (~$300)
  • Bancomer (Bank’s name) will be a good option as they offer bilingual service for foreigner and are well versed on dealing with property owners and renters who are not here all year round and will give you a Gold card which avoids lining up at the branch.

Taxes

  • Annual property tax on catastral value of property
  • Real Estate transfer tax on appraised or fair market value
  • Capital gain tax does not apply in the sense in which it is determined in the United states. The tax on the gain is 35%.  The original land cost, based on the number of years of the property was held and adjusted for inflation according to the official consumer price indexes. Additions, modifications and improvements, but not maintenance, made on the property (construction), adjusted as above. You have the option to work with a qualified legal tax accountant to ensure the whole process is legal and straightforward.

Challenges

  • Need English speaking trusted agent
  • Expensive Financing
  • Very few banks offer foreign national loan programs for U.S. Citizen

Opportunities

  • Mexico s one of the most competitive countries in the world for productive investment due to its macroeconomic and political stability, low inflation, size and the strength of its domestic market, economic growth rate, and capacity to produce advanced manufacturing (high tech products)  Mexico is an open economy that guarantees access to international markets through a network of free trade agreements.  
  • The country boasts a strategic geographic location and competitive costs to service global markets. It also has a large pool of young and highly skilled workforce.
  • Upcoming foreign investment and the related market change, increase in tourism.
  • Commitment of the government to promoting reforms that foster the country’s economic outlook
  • The government has set five major goals for the country: a peaceful, inclusive, well-educated, prosperous and globally-responsible Mexico

Things to know

  • Foreigners buying a property in Mexico need to own it through a bank trust referred to as a Fideicomiso. The Mexican Constitution of 1917 designated the area within 100 kilometers (62 miles) of Mexico’s borders and within 50 kilometers (31 miles) of the coastline as off limits to direct real estate ownership by foreigners.  This are used to be known as the ‘Prohibited Zone” but new beneficial legislation in place now refer to it as the “Restricted Zone”.  The trust term is 50 years and can be automatically renewed for another 50 year period, during these periods you have the right to transfer the title to any other party, including a member of your family.
  • A foreigner can purchase the right to hold, occupy, use, improve, develop, rent and sell real estate by purchasing a beneficial interest in a bank trust or Fideicomiso which holds the legal title to the property.  The bank holds legal title to the real estate and acts as trustee while the beneficial interest in the trust is owned by the foreign individual.  The trustee bank is obligated to deal with the property only for the benefit of the beneficiary.  The bank takes its instructions from the beneficiary owner only.  The beneficiary may be a foreign individual or other foreign legal person such a corporation.  The trust works as a will and testament for the property purchased and saves time and money by avoiding a lengthy probate case (which can be up to 3 years in Mexico).
  • If you are buying in Mexico as a foreigner, you will need the following documentation: Valid passport, valid driver’s license (2 forms of photo ID), proof of address (at home or Mexico), in the form of recent utility bill.   Personal information (full legal name, date of birth, place of birth, address, contact information email and phone. Beneficiary information (full names, copy of their passports or official IDs and addresses). A Mexican CURP number (formal identification number that all Mexican nationals acquire at birth. A Mexican RFC number (Resident foreign Card) if you are planning to stay for more than 6 months consecutively in Mexico. If you are first time applicant, you will need to go to the nearest Mexican Consulate outside Mexico.

Global Investment Council Events

October 23-27, 2017 - Certified International Property Specialist® (CIPS) Designation Course


2017-10-23 09:00:00
2017-10-27 17:00:00
America/Los_Angeles
CIPS Designation Course

1651 N 1st St, San Jose
SCCAOR
events@sccaor.com

Instructor: Fanny Chu

Certified International Property Specialist®
CIPS Designation Course

Monday- Friday
October 23-27, 2017
 9:00 am – 5:00 pm

$599 Members
Register by August 23 9PM PST

$699 Prospective Members
Register by August 23 9PM PST

$750 All after August 24
if available

About CIPS

Last year foreign buyers spent nearly $103 billion on U.S. residential real estate. CIPS education will provide you with the knowledge and resources to position yourself as a global expert.

This 5-day institute will satisfy the education requirements to apply for your CIPS designation, the only international designation recognized by the National Association of REALTORS®.

In this 5 –day CIPS Institute, you will learn the critical aspects of international real estate transactions, including:

  • Globalization of economies
  • International capital flow
  • Marketing and business planning strategies
  • Roles and expectations in international transactions

Step into the global arena and market your business to the world with CIPS.

International real estate opportunities are everywhere, but are significantly different and more complex than domestic deals. Learn how to navigate through the challenges such as:

  • Currency and Exchange Rate Issues
  • Cross-Cultural relationship
  • Regional Market Conditions
  • Investment Performance
  • Tax Issues

CIPS Designation Course Schedule:

  • October 23, Monday: The Global Real Estate: Local Markets course is the prerequisite course for the CIPS Designation. This introductory course offers students an overview of the international real estate business environment, including capital flow, currencies, government regulations and cultures. Topics such as international brokerage, networking, marketing, and selling will also be discussed.
  • October 24, Tuesday: The Global Real Estate: Transaction Tools course provides students with the tools needed to present investment information to international clients—in their currency and area. Students will learn how to measure investment performance, prepare financial projections, and understand the effects of taxes and exchange rates on investment.The Transaction Tools course is normally offered to students in the US only.
  • October 25, Wednesday: The Europe & International Real Estate course provides students with insight in regards to working with clients in Western and Central Europe. Topics include the European Union and its impact on international real estate, economic and real estate trends, networking and relationship building, and marketing and selling practices.
  • October 26, Thursday: The Asia/Pacific & International Real Estate course addresses real estate practices in Asia and the Pacific with emphasis on cultural influences, economic trends and assessment of investment opportunities. An extra chapter on working with the Japanese is also included.
  • October 27, Friday: The Americas & International Real Estate course offers students practical information on working with clients from the Caribbean, North, Central, and South American. Historical and cultural influences, regional relationship, and investment opportunities are covered.

Please note:
• Please bring an electronic device to read along, no paper copies will be provided.
• Course materials will be provided in PDF format 1 week prior to course by email.
• Lunch will not be provided.

Click here to view cancellation policy

Trade Mission Videos

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Follow NAR Global’s social media accounts for more key findings and statistics from the report. (@narglobal on twitter and www.facebook.com/NARGlobal).

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Looking to tap into the growing international real estate market, members of the Santa Clara County Association of REALTORS® (SCCAOR) will join the Vietnamese National Association of Real Estate Professionals (VNARP) on a ten-day trade mission to Vietnam starting on March 1st. Delegates representing both groups are aiming to foster mutual investment opportunities between real estate stakeholders in both Vietnam and the United States.

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LOCAL REALTORS® COMPLETE COURSE TO BECOME CERTIFIED INTERNATIONAL PROPERTY SPECIALISTS

Twelve REALTORS® recently finished a week long course to become designated as Certified International Property Specialists (CIPS). The designees, many who are members of the Santa Clara County Association of REALTORS® (SCCAOR), were given hands-on experience focusing on the critical aspects of international real estate transactions.

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SCCAOR GLOBAL INVESTMENT COUNCIL WELCOMES NATIONAL ASSOCIATION OF REALTORS® DELEGATES FROM THE PHILIPPINES

The Global Investment Council for the Santa Clara County Association of REALTORS® (SCCAOR) recently hosted the National Association of REALTORS® (NAR) delegation from the Philippines. The event, held at the SCCAOR Offices in San Jose, featured presentations and Q&A sessions where the delegates answered questions and discussed the current real estate trends in the Philippines.

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SANTA CLARA COUNTY ASSOCIATION OF REALTORS® GLOBAL INVESTMENT COUNCIL AWARDED GOLD GLOBAL ACHIEVEMENT PROGRAM AWARD

The National Association of REALTORS® (NAR) awarded the GOLD Global Achievement Program Award to the Global Investment Council of the Santa Clara County Association of REALTORS® (SCCAOR) at its national meetings in Orlando, Florida. The award, which was won by SCCAOR’s Global Investment Council during its first year of existence, is designed to recognize and reward the most active associations in global business.

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