Chinese buyers are now chasing after land around military bases?

Another alarmist article has been published about foreign investors, namely Asian buyers, buying up Japanese real estate. While previous articles have focused on the unsubstantiated reports of Chinese citizens purchasing up thousands of hectares of pristine land and water sources, the Sankei Shimbun says investors have now turned their attention to speculating on land both on and around Japan’s military bases. Take this article with a grain of salt as it relies on very few facts and figures.

A rough translation of the article is as follows:

According to real estate related sources from Okinawa, Chinese and other foreign capital is begin used to buy up land surrounding US military and Japanese self-defense force bases across Japan. A Singaporean-based company has set up a real estate office near the Kadena Air Base in Okinawa, and over a period of time a number of websites have popped up advertising military land for sale.

Ordinary civilians can purchase sections of land within military bases and become landlords. The land was originally held by local Okinawa residents, but in the past five years, the number of landlords from outside of Okinawa and outside of Japan has been increasing.

In 2004, the Japanese Government paid a total of 87.1 billion Yen in rent for military bases across Japan. In 2011, the rent had increased to 91.8 billion Yen (1.2 billion USD).

According to the Ministry of Defense, approximately one third of the US military bases in Okinawa are owned by 39,000 private individuals. Of these owners, 231 are foreigners.

Kevin Maher, former director of the office of Japanese affairs in Washington, warned in his book “The Japan That Can’t Decide” that China’s Ministry of Commerce was purchasing up land in Okinawa through private organizations.

At the other end of the country, foreign funds were used to purchase 3 forest areas totaling 109 hectares in the town of Kucchan, Hokkaido, and 3 kilometers from a self-defense force base. Hokkaido attempted to contact the owners of land and forestry near military bases and police stations by mail. 54 of the landholders owning a total of 579 hectares of land could not be contacted at the registered address on the land register. Six of the landholders surrounding the military bases were corporate entities which could not be contacted. There is a chance that they set up dummy companies as a way to conceal their foreign identity*1.

In recent years, many districts across Japan have made an issue of the purchase of land by foreign investors. In 2007 a Korean company purchased land adjoining land used by the Maritime Self Defense Forces. The land was purchased to develop a resort hotel, but raised the attention of locals.

According to insiders, there are many cases where foreign investors will purchase the land based on cadastral maps and surveys without even visiting the site.

In addition to concerns over national security, cadastral maps may not always have clearly defined boundaries which can lead to boundary disputes with neighboring landholders down the track.

*1 There are plenty of tracts of land and even homes across Japan that are registered under Japanese paper companies for tax and other purposes, so it is a baseless assumption to say the owners must all be foreign. Many Japanese owners of vacant land cannot be contacted either because they moved or passed away without the land register being updated.

About military land for sale in Japan:

Buying military land in Japan is very attractive as the rent paid to landlords by the Japanese government have been steadily increasing, regardless of economic conditions. The land values are not based on market prices, but are based on the rental yield. The land has very low annual property taxes as it has no commercial or development use as a military base. There are also no maintenance costs that could be expected with any other real estate investment.

The relatively safety and stability of purchasing military land means that it is in high demand, so the land is easy to resell in the future. Investors are also keen to hold land on bases which might be slated for closure in the future as they will then offer development potential.

Source: The Sankei Shimbun, January 27, 2012.

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