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Japanese banks lending more to foreign property investors

It used to be very difficult for a foreigner, especially one not married to a Japanese national, single woman and contractors to be able to borrow to buy real estate.

At a time when Americans and Europeans are having trouble getting credit to buy a house in their own countries, their compatriots living in Japan are borrowing tens of millions, and sometimes hundreds of millions, of yen from local lenders for real estate.

Most big Japanese banks are open for foreign business, according to brokers and borrowers. The local banks also face competition from foreign institutions like Commonwealth Bank of Australia, National Australia Bank and GE Consumer Finance, all of which offer loans for foreigners living in Japan.

Property loans amount to around $155.12 billion according to the Bank of Japan. Banks in Japan are placing greater emphasis on retail banking, especially home loans, but lending to foreigners is rarely advertised.

The minimum requirement is that a foreign applicant has permanent resident status in Japan. 'There are many rules and principles, but there are also many exceptions,' said Tony Collins, a loan broker with IFG Asia Mortgages in Japan, part of IFG Group of London.

'If the applicant has lived in Japan for an extended period of time, has stable employment with a Japanese company, et cetera, there is no reason not to extend the loan,' said Takashi Takeuchi of Bank of Tokyo-Mitsubishi UFJ, Japan's largest bank.

Interest for mortgage loans starts around 1 to 2% for variable rates and about 3% for fixed rates, and the terms can be as long as 35 years. The average yield on rental property is around 6%.

As banks internationally are tightening credit, the amount of a typical mortgage has shrunk from 80% of the purchase price to between 50 to 70% for banks in Hong Kong and Singapore. But in Japan 80% is the standard and in some cases it is possible to get a 100% loan.

One foreign property investor who has benefited is John Harris, a speechwriter who has lived in a Japan for many years. With no permanent resident status, no job contract because he is self-employed, and a non-Japanese spouse he was also hoping to buy an unusual property: a house surrounded by lush green forest that is a noncommutable two hours by train from central Tokyo.

Yet through a loan broker he secured the finance for his dream home. 'It's not easy, but today it's possible to get a loan in Japan if you are persistent,' Harris said.