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Japan’s property market powering ahead
A number of factors, such as the 2020 Tokyo Olympics and economic reforms, are driving Japan’s property market.
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The strong capital appreciation, stable rental yields, a weakening yen and the upcoming 2020 Olympics continue to attract foreign investors to Japan’s property market.
According to reports, residential sales in Japan continued to rise during the first five months of 2016, despite gloomy reports that many of the major economies are facing a slowdown.
Based on figures released from the Land Institute of Japan (LIJ), the number of existing condominiums sold in Tokyo rose by 5.4 percent to 16,152 units from the same period last year, while existing detached house sales increased more significantly by 14.3 percent year-on-year (y-o-y) to 8,224 units.
Residential sales for existing condominiums in Osaka also rose slightly by 0.3 percent y-o-y to 7,508 units in the first five months of this year, while existing detached house sales rose by 8.4 percent to 5,642 units.
The report noted that land sales are also surging. In Tokyo, lots sold increased by 25.5 percent to 5,096 units in the first five months of 2016 from the same period last year. In Osaka, land sales surged by 21.7 percent to 1,162 units over the same period.
Some of the factors attributed to growth in Japan’s property market include the upcoming 2020 Tokyo Olympics, as well as the introduction of Abenomics (Prime Minister Shinzo Abe’s own brand of economic stimulus). For instance, the quantitative easing introduced by Abe’s economic reforms deliberately marked the yen down, thus putting foreign investors in a very favourable position.
“Abenomics has clearly been positive for real estate investment, leading to better liquidity, deregulation in urban development and lower property taxes for investors. The message from the government is that Japan is very much open for business. Many foreign and local banks are also easing lending to foreign investors and opening more doors into Japanese property,” said Elizabeth Chu, Senior Investment Manager at property investment firm IP Global.
Data collated from Juwai.com, China’s largest international property website for Chinese buyers, found that Chinese buyer enquiries for Japanese properties on their portal surged by 191 percent year-on-year in 2015, with these enquiries worth US$532 million in terms of consumer enquiry value.
Sharing similar sentiments, an HJ Real Estate report also noted that the increase in cross-border investments into Japan has rapidly expanded its country’s real estate market. “The Chinese are known as the major factor for rising market price – some buy for residency visa, while others buy for shifting their assets. Although government restrictions limit the movement of money out of China, the demand is still very strong.
“Based on figures from the past few years, we can see that Chinese buyers have significantly driven the real estate market, namely in the US, UK, Canada, Australia, Hong Kong and Singapore. Although cross-border ownership of Tokyo real estate is only 12 percent, as compared to London (61 percent) and New York (32 percent) – some have pointed out that it is due to language barrier – many other international investors say that Japan is still a very attractive market due to several reasons including political and economic stability, as well as the good standard of living, established infrastructure, safe environment, top-notch health and educational system, high standards of building construction and maintenance, and most importantly, the quality of property management is world class,” said the report.
Looking ahead, experts predict foreign investors will continue ploughing money into Japan’s property market due to low interest rates, political stability, attractive rental yields, and the prospect of rising land values ahead of the 2020 Olympic Games.
Why invest in Japan?
A safe haven
“The world economy is currently facing a slew of uncertainties due to a series of events such as the (the uncertainty of a post) US Presidential Election, Brexit, falling oil prices, the uncertain economic situation with China and Europe, and many others. During times of economic uncertainties, real estate is often considered as one of the strong options to add to one’s investment portfolio.
So, the important question that investors often seek an answer for is: Where is the best place to invest in real estate? Undoubtedly, the most important factor investors have to consider is the location. The country or place where you invest in a property must be safe, stable, and yet, has potential for growth. It would be ideal if the place where you intend to invest in a property does not impose additional purchase or sale tax, and more importantly, does not have restrictions in direct foreign ownership to any real estate. If you think this sounds too good to be true, you’d be pleasantly surprised to know that there are no restrictions in direct foreign ownership of properties in Japan, and the country does not impose additional taxes for foreign ownership,” said a HJ Real Estate report.
Japan set for more growth
Touted as Asia’s leading city, Tokyo has the world’s largest metropolitan economy – worth US$1.6 trillion – and is also the world’s largest metropolitan area, with a population that in 2014 reached 35.9 million – over four times the size of London or New York. While figures show that the population in Japan has begun to decline, central Tokyo is expected to continue attracting residents into the 2030’s, as more Japanese come to settle there from rural areas.
And that’s not all. According to one of HJ Real Estate’s research reports, there has been a massive growth in Japanese tourism, and the numbers look set to continue rising. “There has been an increase in tourist arrivals to Japan – 10 million in 2012, 20 million in 2015, and they are targeting 40 million in 2020. The factors that can be attributed to the significant increase in tourist arrivals are: the weakening of the yen, as well as the Government’s reformulating of Visa policy for tourist visa,” said the report.
The report also added that the city is currently going through an infrastructure investment boom in the lead up to its hosting of two major international sporting events: the 2020 Tokyo Olympics and the 2019 Rugby World Cup.
“The Games themselves are forecast to directly inject some JPY3 trillion to the economy, and create over 150,000 jobs.”
Increase in investment value due to the Olympic effect
The upcoming 2020 Olympics is set to boost Japan’s property values, especially those in the city, due to improvements in infrastructure and the surge in population, said experts.
“We see the values of Tokyo’s properties rising by between 20 and 30 percent from 2016 to 2020, when the Summer Olympics will be held,” said Akihiko Mizuno, Head of Capital Markets for JLL Japan.
Host cities in the past, too, have seen astonishing price increases in the lead-up to the games – Beijing saw a 20 percent increase, while Athens recorded a 75 percent jump.
Relatively affordable price tag for a high quality property
According to the Real Estate Economic Institute Co, Tokyo apartment prices have risen to their highest levels since the early 1990s, having advanced 11 percent over the past two years.
Yet for foreign buyers, Japan remains inexpensive. The average price of a three-bedroom apartment in Tokyo’s 23 wards and surrounding prefectures was ¥53 million (US$440,000) in April, compared with HK$8.4 million (about US$1 million) for a 600 sq ft apartment on Hong Kong Island, or US$554,000 for homes in New York.
“Global investors, including mainland and Hong Kong buyers, are attracted to Tokyo’s residential properties, which are relatively cheap compared to those in Singapore, New York and London,” Noritaka Noma, Head of Sales and Marketing Japan at Grosvenor Asia Pacific, was quoted as saying in a recent news report.
Sharing similar sentiments, a HJ Real Estate report said: “Comparing to the other metropolitans in developed nations, the price is low and the rental yields are relatively high, especially in major cities like Tokyo, Osaka, Nagoya and Fukuoka where rental incomes are very stable due to low vacancies and strong internal migration.”
Rising rents
Based on research conducted by Global Property Guide in April 2016, gross rental yields – the return earned on the purchase price of a rental property before taxation, vacancy costs and other costs in Tokyo’s central districts, range from 3.4 to 5.4 percent.
Yields on Beijing property average just two percent, making Japan’s higher yields attractive to Chinese buyers who face restrictions buying second properties in the domestic market.
And according to figures from the Japan Real Estate Institute, rents are rising modestly. In 2015, the nationwide apartment rent index rose by 2.7 percent from a year ago – in Tokyo, apartment rents increased 5.2 percent y-o-y in 2015, while in Osaka, apartment rents rose by 1.4 percent y-o-y over the same period.
Beyond yields and value appreciation, Japan is immensely attractive for foreign buyers seeking to either emigrate or invest in a holiday home, as the Land of the Rising Sun is not only known to be a safe and efficient country, but is also known for many other things, such as its delectable cuisine, rich and diverse culture, and high quality products.
About HJ Real Estate
For prospective buyers searching for good investment opportunities in Japan, they can enlist the help of HJ Real Estate who can provide plenty of useful information and advice to help investors make well-informed investment decisions.
An associate company of Housing Japan K.K., a major international real estate agency in Tokyo that was established in 2000, as well as HJ Asset Management K.K. – an independent asset management firm, HJ Real Estate, which has an established history in providing a broad range of real estate services to clients both in Japan and around the world, is the gateway to Japanese real estate.
In fact, a recent news report by Bloomberg revealed that the most expensive property ever sold in Tokyo since 2004 was designed, developed and marketed by Housing Japan.
A Chinese investor had paid about JPY690 million and JPY680 million respectively for both homes, which are located adjacent to each other in Akasaka, a high-end commercial district in Minato, Tokyo.
Investors looking for either a holiday home or a property solely for investment purposes in Japan, HJ Real Estate has an extensive portfolio of projects in Japan, from brand-new and secondary market condominiums and vacation homes, to landed and commercial or office buildings, for you to pick from.
In addition, as an officially licensed Singapore estate agency, HJ Real Estate not only has direct access to Japanese local financing and tax options, but they also ensure complete legal compliance with local authorities. Lastly, the company’s strength in various languages allows them to effectively service their clients of diverse backgrounds.
For more information, visit hjrealestate.com.sg and email Tsutomu Sato and Peter Koh at Marketing@hjrealestate.com.sg
Disclaimer: All forms of investment carry risks, including the risk of losing all the invested amount. Such activities may not be suitable for everyone. This is an overseas investment. As overseas investments carry additional financial, regulatory and legal risks, investors are advised to do the necessary checks and research on the investment beforehand.
