Can You Defend Your Real Estate Assets in the Age of Inflation?
I recently gave a lecture titled "Japan's Real Estate Market Conditions and Asset Defense Techniques in the Age of Inflation.
The key point of this seminar is not to double your assets, but to "defend" your assets.
In other words, how do you prevent your assets from decreasing?
The first goal of those who have exceeded a certain amount of assets is to "not reduce" rather than "increase" their assets on a daily basis.
Since this seminar was hosted by a real estate company, it was natural that most of the participants had a lot of assets, mainly real estate.
By the way, first of all, I talked about the risks of holding only the "yen" currency in this day and age.
The CPI for Japan released the other day was about 3.5%, but the "core" index, which excludes energy prices that were lowered by subsidies and other policy measures, was about 4.5%.
It came close to the 4.9% of the U.S. CPI announced at the same time.
It is said that the U.S. CPI may have already peaked this time. However, there are voices coming in from overseas that the CPI is expected to rise again from this fall. A friend of mine, a rare investor living in Australia, also mentions the same risk.
The most important thing is that workers' salaries, which are one of the causes of inflation, have not hit the ceiling.
To return to the topic of Japan, a 4.5% increase in the price of goods and services in one year means that the value of the yen has fallen by 4.5% in the same year.
What about real estate? The world has been reporting on the rise in the price of condominiums in central Tokyo.
But what determines the value of real estate? Generally, it is determined from the revenue obtained from it.
Therefore, if rents can be increased in line with the rise in consumer prices, it should theoretically be possible to prevent a decline in prices. However, unlike real estate in New York, Japanese real estate cannot be raised on its own by the lender alone for reasons of the landlord's own convenience or rising prices, due to Japan's unique house rental laws.
This is a problem unique to Japanese real estate.
So what should we do? I will talk about that in the next issue.
Takashi Hasegawa
President of Hasegawa Real Estate and Economy, Inc.
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