But now that the Japanese economy is back on track, interest rates are at a record low and property prices have had their first rise since 1990, foreign residents are getting excited about buying in Tokyo and elsewhere in Japan. Despite a recent shake in the Tokyo stock market after a corporate scandal, Japan’s economy is expected to grow by 2.5 per cent in 2006.

Hiroyasu Senaga, of the Tokyo estate agents Plaza Homes, says: “It’s a good time for investors looking for stable rental revenues with the least risk-taking. High rental prices continue in Tokyo, but the mortgage rates remain low in the range of 1 to 2 per cent for a variable rate,” he says. Residential and commercial rental returns in Tokyo are 1 or 2 per cent higher than in London or New York, while big investors such as Goldman Sachs have poured billions into buying urban properties recently.

“The market is quite hot,” says Yuya Sugimoto, of Ken Real Estate Investment Advisors. “Buy-to-let investors, corporate investors and the rich are all competing to buy luxury properties in Tokyo. The supply is dipping as prices skyrocket.” Because of that pressure, upmarket properties have almost all been snapped up. Now developers are shifting their attention towards less posh areas of Tokyo and its suburbs. High-rises are sprouting all over the city, particularly on the once ignored seafront; their creators use the likes of Richard Gere to promote the huge developments that they hope to fill with Japanese who hanker after a city-slicker life and foreigners who want a waterside superpad.

Prices for high-rise flats in those areas are much lower than those found in the established stalking ground of the expat — Roppongi and Hiroo — and go for about Y40 million to Y50 million (about £200,000 to £240,000). “In fact, there are so many condos,” says Kojiro Nakamura, a property investment specialist at Ottoman Capital Japan, “that buyers can be selective and try a little bargaining. Nor is there any need to rush — I don’t see interest rates rising in the near future.”

Financing the purchase is no longer the headache it once was, he says. For the foreign buyer there were more hoops to get through than at a Queen of Hearts croquet match, but now foreigners can buy property relatively easily. Banks have became more flexible, too, when lending money to non-Japanese. Some foreign banks, such as Standard Chartered, have introduced loans to buy properties. One Japanese loan company, Shinsei, hosts regular seminars for potential foreign buyers and is offering home loans of Y5 million to Y100 million, and terms up to 35 years with a choice of five-year fixed or floating interest rates. The company also points out that permanent residence is no longer the issue it was a few years ago, and buyers no longer need a long-term visa to be considered. Those with a large lump sum to invest can even purchase on a visitor’s visa because there are few restrictions on full cash purchases.

“But if you do take a loan, it is worth remembering you will be able to reclaim some income tax,” says Steve Beardsley, who teaches mathematics at an international school in Tokyo. He has just bought a house and land 150 miles (241km) from Tokyo, near the Japanese Alps. Beardsley, who has been in Japan for 17 years and speaks Japanese, says he did not need a loan because the house came free with the land, which cost him about £30,000 — incredible, but common in the Japanese countryside. “I reckon it will cost another £30,000 to renovate. It is huge, with lots of impressive old beams, an annexe cottage, a garden with 100-year-old statues and a vegetable patch the size of a tennis court. The house backs on to a rice-field valley reminiscent of Bali, and it faces the Alps.”

The house is only two minutes’ drive from fishing ponds, five minutes from a spectacular golf course, and 20 minutes from the Nagano skiing resort. “Compared with what is available for £60,000 in the UK, I think we are on the right track,” he says. Insuring the property was cheap, as were other costs. But, as he points out, the downside of purchasing in Japan is that you cannot get insurance against earthquakes. If one thing is certain in this mountainous country, it is quakes.

Another downside is tax. “There is a kaleidoscope of taxes in Japan that even the Japanese do not fully understand,” says Nakamura. “There is acquisition tax, registration tax — it goes on and on, and it gets complicated when it comes to non-residents, especially if he or she is investing from outside with no intention of living here but only renting the property out. Liabilities can run to around 30 per cent a year.”

So if Japan is your cup of green tea but you are put off by the significant risk of earthquake, then the safest way to make an investment in Japan is through the purchase of land.

The bolder investor could do worse than join a growing trickle of savvy foreigners buying in the cities and the countryside — that is, the parts that the Government has not concreted over. There is certainly more than sushi, shares and saké to satisfy the canny investor in Japan.

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