By Nils Herchenroeder, Tokyu Housing Lease Corporation
Many owners who have just purchased a residential property in Japan ask us how long it usually takes to find a tenant for their property. While this question is hard to answer because it depends on factors like the current market situation, the rent of the property in question compared to the assessed market rate and factors related to the property itself like layout, equipment, view etc. it is also good to know how seasonal demand can affect renting out your property.
Since the majority of your tenants will be Japanese individuals or corporations let’s take a look at the typical seasonal situation in Japan.
January to March: Peak Season
This is the annual peak season for both tenants and landlords.
There are several reasons for this: Most Japanese real estate companies (developers, leasing brokers, property managers etc.) close their books at the end of March, so they are trying to close as many deals as possible by the end of their financial year.
On the demand side, new college graduates and many lateral hires also start new jobs in April, which is when many Japanese companies start their fiscal year. This also applies to college students starting their studies. Popular properties usually start filling up from around January and February, so tenants have to move quickly to secure their living quarters.
The average time period between property viewing and lease signing is around one week, which leaves almost no time for negotiating the rent.
April to June: Lower demand
When the peak season is over, real estate agents will try to fill up the vacant properties that they could not manage to close by the end of March. At the same time, there is also much lower demand.
In the worst case scenario, this means some properties could potentially sit vacant for a whole year, until the next peak period.
Some owners and property managers might be open to negotiating some perks for potential tenants.
For example, they might offer no key money, slightly lower rents or invest in upgrading certain properties to make them more attractive. Landlords will push agents and property managers to fill up remaining vacancies in April, so for some tenants, this could be an opportunity to get a good deal on a property.
June to July: Continued Lower Demand
This is also a period with low activity in the market. Real estate companies usually have some extra time on their hands and landlords can be hard-pressed to get new tenants over the summer. This is also a period where tenants might be able to get discounts on the advertised rent.
September to October: Pick Up in Demand
When we enter the fall season, activity in the market starts to pick up again. There is less activity than in the peak January to April period, but there is certain demand for properties due to many Japanese organizations having inter-company transfers. Additionally, a lot of real estate companies have to report their half-year results (which close at the end of September), so they will try to generate some sales during this time. New properties are also being prepped for the peak period.
November to December: Preparing for the Peak Season
Here we enter full-blown preparations for the upcoming peak season. Some real estate companies will try to move fast before the competition to find tenants for their new stock and will try to disseminate this information through the internet or real estate brokers.
On the tenant side, there is not much activity in regards to moving-in or out, so details about the timing of the beginning of the lease can usually be discussed. Potential tenants may also try to negotiate for a small discount on rent.
Hopefully this guide will help you understand the seasonal fluctuations in the rental market and what it can mean for the vacancy risk of your property. If you are concerned about this, some property managers offer a rental guarantee for eligible properties that pays rental income to the owner even if the property is vacant. This guarantee will help you protect your downside risk.
Tokyu Housing Lease Corporation is one of Japan’s leading property management companies.
If you are interested in learning more about Tokyu Housing Lease’s PM services, please fill out the form below, and a representative will contact you shortly.
Top photo: Apartment buildings along the Sumida River, Chuo Ward, Tokyo
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