Niseko Update Dec 2021
My observations in Niseko (Kutchan, Hirafu and Niseko towns)
I am a lover of winter and snow. I bought a house in Niseko (Hanazono, Kutchan area to be more precise) several years ago and am wondering do I sell or hold this now?
“Kutchan was home to the highest increase in both residential and commercial land prices nationwide in 2021. Commercial land at one site increased by 21%, after seeing a 57% increase in 2020 and a 58% increase in 2019. Land was valued at 121,000 Yen per square meter as of January 1, 2021, up 375% since 2015.” — Japan Property Central report, Mar’2021
There you have it, we are in a boom time.
What has happened in my opinion?
- Pre-2005 — Japanese build-out of old-style Japanese resort hotels etc
- 2005–2015–1st Foreign build-out by Australian (and New Zealand) communities building some nice chalets, inns, and condos
- Post-2015 — 2nd build-out by Hong Kong, China, and Singaporean investors building some mega chalets and hotels
I was house shopping in 2015, at which time $500k got you a nice condo on the slope, a very old house in lower Hirafu, or a quaint chalet in Hanazono. A fancy house would go for $1.5 (ref Solitude in Hanazono and Orchards near St Moritz — which now are asking over 2x that in 2021).
I think the buyer market has split into two:
- Mega millionaire/billionaire folk who want a trendy Niseko ski house and are paying $2m-$5m to buy a residence in a ski-in/out like Park Hyatt or a fancy chalet in a managed area like the Pavillions.
- Working-class high-income folks who see the investment potential and are jumping on the wagon, able to put in up to $1m-$2m. Condos and smaller chalets are options for these folks but ROI is a concern.
Naturally, we have a low-end squeeze, there is not much available at the $500k mark anymore.
Oddly we also have a mid-end squeeze, buyers want high end luxury and the stuff that seems to be developing fastest are $2m+ mega houses (even more in the $4m+ range!). It is becoming a mega high-end market.
There is a Risk of Over-Development
There have been various local concerns of over-development like over-tapping of the sewage and water supply, and lack of infrastructure development to help support the tourism boom.
Here’s an example of what some call “poorly planned” development — White Villa — supposedly sold out immediately to HK/Chinese buyers last year at attractive entry prices (~50m JPY). Local concerns were lack of enough well water, houses too close together, limited street access, etc, etc. I’m not sure what the real story is, but it is worthy of an investigative deep dive. It reminds you of the bubble era where property scams were rampant in the frenzy to buy land — some remnants of this exist in Niseko.
As one drives thru the Niseko area, a few things come to mind
- It is a fabulous town with 5-star and local dining, big-name and boutique hotels, millionaire mansions and cheap dingy lodges, and the best powder in the world.
- There is ALOT of undeveloped land even in Upper Hirafu. There are old buildings or empty lots that are undoubtedly worth millions/billions once developed.
- Infrastructure is lagging behind, the roads are mostly only 2 lanes including the main freeway (2hr from Chitose/Sapporo). A Shinkanesen line is planned but at least 8yrs away.
4. Development is scattered about across the 4 resort areas (which is probably a good thing). Just like Hirafu, there is ALOT of land in these areas which makes you wonder why the shortage?
Buy, Sell, or Hold ?
So what is a real estate investor with limited funds to do?
Why buy:
Billions are coming in — in the Hanazono area alone, we have a Park Hyatt just built 2 years ago, HanaRidge (485m JPY Riccardo Tossani homes) this year, Hana Creek and Capella Resorts next year. Do luxury neighbors raise the value and enjoyment of my villa? I like having restaurants and cafes — I don’t like having crowds..
Hanazono was a bit quiet before — could this be the beginning of a bigger boom cycle for the area? If you are rich, this is probably a good place to invest in a getaway. I’m not so rich.
Elsewhere in Hirafu, Niseko Village, and Annupuri, it is the same, luxury hotels and villa zones popping up like crazy.
Why Sell:
One should be realistic when buying real estate in Japan and think — the land will appreciate a little, the house will depreciate quickly, and in the end you will not escape with a profit. — Anonymous
Taking money off the table is never a bad idea.. don’t be too greedy? I would like to invest elsewhere as well, so having the capital do a bit more work for me may be better than it sitting in my vacation house…
Maintenance/running cost is something people need to understand. You’ll have seasonal run costs of heating (even while not home so pipes don’t freeze), snow clearing, etc. There are off-season repairs and gardening. The weather is intense and beats down on your house. I’d put an annual estimate of $8–10k USD for snow clearing, energy, taxes, repairs, property management, etc.
Why Hold:
I think real estate in Niseko is likely going to be like what they said about California — you can sell and leave with cash, but you’ll never be able to return. Prices only go up in popular areas, and at the moment Niseko is very popular (and so is Central Tokyo and Karuizawa).
It is hard to know if the mega-developments next door will have a significant impact. I suppose waiting to see if I like what happens is an option. If the bubble bursts, I guess we wait another 12 years for the cycle to repeat… or will Global Warming end it all? Who knows..
Note, my dogs really love hanging out in the snow. It may be the deciding factor!
FYI — a nice site to try to search for properties in Niseko across different brokers is Uchi Japan. I hate how there is no central site to search all listings but hopefully that will change oneday!
