For many, Japan has always been a captivating destination renowned for its rich history, enticing cuisine, and breathtaking landscapes. Traditionally, tourists would come to immerse themselves in its culture, only to leave with memories. However, the FT reports that 2023 presents a different picture. Japan, it seems, has become a hotbed for international property investments.
The Shift in Perception
Tokyo has always been known for business and shopping, while Osaka was celebrated for its gastronomy. Karuizawa was a retreat into alpine forests, Kyoto held the keys to Japan’s historical heart, and Niseko boasted some of the world’s finest skiing terrains.
But this year, foreign perceptions took a turn. Tokyo is now sought after for its luxury apartments, Osaka for its forthcoming casino, Karuizawa for hilltop estates reminiscent of spy films, Kyoto for its renovated traditional houses, and Niseko for its esteemed ski lodges.
Why the Sudden Interest?
Two significant factors are driving this trend: the weakened yen and an incredibly low cost of borrowing. While these are certainly appealing, the underlying demand has been even more robust. Real estate agents are witnessing a surge in inquiries from overseas buyers, particularly from places like Singapore, Hong Kong, and mainland China. Some agents have seen a staggering five to ten times increase in inquiries within just nine months.
Institutional investors, private equity firms, and corporations are also joining the fray, all looking to capitalise on Japan’s thriving real estate market.
More than Just a Tourist Destination
The appeal of Japan’s real estate market is not just confined to its tourist attractions. For big-time investors, Japan provides predictability amidst a world that often feels uncertain. Despite the global trend of remote working due to the pandemic, Japanese office workers are largely back to their desks. Interestingly, as Japan leans towards a stable political environment, many companies are under pressure to sell off real estate assets, creating unique investment opportunities.
China, once a focal point for investments, is now seeing a diminished allure both economically and geopolitically. Contrarily, Japan’s consistent political climate, particularly after Shinzo Abe’s leadership followed by Fumio Kishida, has made it a favorable destination for investments. Daisuke Kitta, who oversees real estate at Blackstone in Japan, opined, “Japan offers political stability, a reliable financing environment, and potential growth.”
The Data Speaks
Recent figures support the burgeoning interest in Japan’s property market. International investment in Japanese real estate soared to ¥513bn in the first half of 2023, a noticeable rise from ¥362.1bn during the same period the previous year, as per a report by Jones Lang LaSalle.
Furthermore, Tokyo has climbed the ranks to become one of the world’s most attractive cities for property investment, only surpassed by Los Angeles. A whopping $9.3bn was invested in Tokyo’s real estate, surpassing cities like New York, Paris, Dallas, and even London. Meanwhile, Osaka secured its spot with investments worth $1.9bn.
Where are the Investments Heading?
While historically most foreign investments in Japan were directed towards office spaces, there’s been a notable shift. Investments are now flowing into growth sectors like logistics, and the hospitality industry, which was hit hard during the pandemic but is now on a rebound. Christine Li from Knight Frank highlighted that “the spotlight has shifted towards growth-inducing asset classes poised for an upward trajectory.”
Big Moves on the Horizon
One notable move in the market is Singapore’s sovereign wealth fund GIC contemplating the sale of its 46-storey Shiodome City Center skyscraper in Tokyo. If it goes through, it could be among Japan’s biggest real estate transactions.
A Word of Caution
Despite the evident promise, Eiki Shibao of NorthEast Capital Management advises investors to tread with care. Investing in Japan can be fruitful, but one shouldn’t forget the complexities that come with doing business in a different culture.
In conclusion, Japan has transitioned from being just a tourist hotspot to a lucrative investment hub in the property sector. For those contemplating diving into this market, now might be an opportune time to take the plunge.