I have a masters degree is psychology with my thesis being investor behavior. Prior to being a real estate agent, I was a forex trader and I’m proud to say thanks to my education, I was able to accurately derive a forex client’s mentality by looking at their trade history.
Since the vast majority of our clients are foreign, in addition to the ups and downs of the property market in central Tokyo, the forex element always enters into the conversation. People living in Japan always have some kind of exposure to overseas markets and vice versa; people living overseas are looking at Japan from the outside in.
While the forex element of a property trade is something that needs to be factored in, the most important factor should always be on what the domestic property market is doing and where the property that you are thinking of buying sits in that matrix.
A couple of years ago, I was approached by a client who had already signed a purchase agreement and paid a 10% deposit for an off plan condominium. The developer had informed the client that delivery would be delayed a couple of months. This timed badly with the yen strengthening which was the main reason the client wanted out of the deal.
This client lived in Singapore and received my contact details from another client I had helped. The client wanted me to negotiate the contract cancellation and procurement of the previously paid deposit.
I had known of the property prior to this and had a strong opinion that it was still a great buy. I advised that the purchase should continue given where the market was heading.
The client was set that they were not buying this property and no amount of convincing would change their mind. Despite the developer being publicly traded with a very long history and track record, the client had lost faith in the developer’s ability to finish the project.
The client explained to me that they had some bad luck purchasing new in another country where that developer did go bankrupt eliminating the client’s right to the deposit and any ownership whatsoever.
In the end we were able to cancel the purchase contract and the client received their 10% deposit back.
However given the forex movements, the client ended up being thousands of dollars out of pocket thanks to the Yen strengthening.
Since then the property the client gave up on has risen over 30% in value. The client regrets not purchasing when they had the chance because the subsequent price rise negated all perceived benefits of the forex trade.
Moral of the story: Always make sure your purchase is centered on what the property market is doing. Any other perceived benefit should take a back seat and be treated as a possible bonus benefit at best.
Editor’s Note: Shirley is Sales Director for Housing Japan. She has sold billions of yen of real estate and arguably has the highest client satisfaction rating in the industry. Shirley writes a weekly column for Housing Japan readers to help illustrate common challenges buyers and sellers have when trading Tokyo residential property.