The Japanese real estate investment trust (Reit) bond market is beginning to thaw after two years as the economy picks up, though an increase in property prices is needed to achieve full recovery, said Fitch Ratings.
“New bond sales are recovering to some extent,” said Toru Kobayashi, director of structured finance at Fitch Ratings, in an interview.
Some Reits are still subject to risks and need to see “improvements in property performance”, he added.
Data compiled by Bloomberg showed that sales of Reit bonds in 2010 totalled ¥124.5 billion or S$1.96 billion, a recovery from a single public sale of ¥3 billion in 2008 and none in 2009.
The Tokyo Stock Exchange Reit Index has increased 0.6 percent in 2010, while the Topix index has declined 9.1 percent.
Land prices began to fall in 2008 as the global crisis intensified with the fall of Lehman Brothers Holdings Inc.
The Bank of Japan said new lending for real estate by Japanese banks hit its lowest point in a decade in 2009.
“Among some borrowers with a smaller size or inferior financial standings, we see extension of short loans or finance in the short term,” said Mr. Kobayashi. “Such Reits haven’t eased their finance risk.”
In August 2009, the Japanese Ministry of Land, Infrastructure, Transport and Tourism announced that a ¥500-billion fund would be created to provide assistance to Reits in refinancing their debt.