Tokyo’s property market is expected to see a surge in buying activity due to the weaker yen, 2020 Olympics and robust rentals.
By Romesh Navaratnarajah
In recent years, there has been a rise in the number of investors from Singapore and other parts of Asia looking to enter the Tokyo property market, which is primarily driven by the banking, finance, electronics and tourism industries.
Since the announcement of the 2020 Tokyo Olympics and the introduction of Abenomics (Prime Minister Shinzo Abe’s own brand of economic stimulus), the property market has seen a surge of buying interest amongst foreigners, said Khalil Adis, founder of Khalil Adis Consultancy.
“Japan is now slowly opening up its property market to the world. It used to be almost impossible for foreigners to get financing in Japan, but that has been relaxed over the years.
“Some developers provide end-financing. You can get a loan from some Japanese banks, but must show proof that you are a permanent resident or residing and working in Japan. However, OCBC does provide end-financing from Singapore,” he added.
According to The Land Institute of Japan, existing condominium sales in Tokyo rose slightly by 2.2 percent to 15,330 units in the first five months of 2015 compared to the same period last year.
Supply goes down, prices go up
Quoting figures from the Real Estate Economic Institute, Adis said the supply of new condos has fallen significantly since the peak of 39,000 units recorded in 2004.
“The supply dropped to a low of around 16,000 units in 2008, partly due to the Global Financial Crisis. It picked up considerably in 2013 to reach almost 28,000 units. Last year, the supply was almost 21,000 units while the number of units sold was around 16,000.”
Likewise, housing prices in Japan’s capital rose sharply during the year to Q2 2015, according to the latest house price survey by Global Property Guide. “In Tokyo, the average price of existing condominiums rose by 6.13 percent during the year to Q2 2015, up from the growth of 2.68 percent in the previous year. However, property prices dropped during Q2 by 0.5 percent.
“The Japanese economy actually contracted by an annualised 1.6 percent in Q2 2015, in contrast with an expansion of 4.5 percent in the previous quarter. The economy shrank by 0.06 percent last year but is expected to return to growth this year with real GDP growth of 1.04 percent,” the report said.
Meanwhile, Tokyo’s high housing prices have failed to dampen overseas investors’ appetite, counterbalanced by the decline of the Japanese Yen from ¥78.68 = US$1 in August 2012 to ¥123.24 = US$1 in August 2015.
Better off renting
With housing in the city becoming largely unaffordable for locals, many prefer to rent, explained Adis. “In Tokyo, the rental market is particularly attractive, with rental yields between five and 10 percent.”
His advice for those exploring investment opportunities in Tokyo is to think like a local.
“Most locals who work in the city live outside in the suburbs, surrounding prefectures, and regions. As housing is expensive and the commute time from the suburbs to central Tokyo is quite a distance, most locals prefer to rent within the city.
“Generally, properties that are located within proximity to the Tokyo subway are popular and can be easily rented out. It is best to get units in the resale market rather than new launches, as the capital values for new units tend to depreciate over 30 years. “Since older properties are already devalued, they offer the best rental yield,” said Adis, with the popular rental areas being Minato, Chuo, Shinjuku, Shibuya and Shinagawa.
Global Front Tower was marketed for the first time in Singapore earlier this year. (Photo: CBRE)
He added that the average family size among locals has also shrunk, meaning that many Japanese prefer to rent studio units or one-bedders.
CBRE noted that rental demand for apartments in Minato Ward is especially strong due to its central location and proximity to offices and international schools. In January, the agency showcased an 883-unit high-rise condo from the area to Singaporean investors.
Developed by a consortium led by Mitsui Fudosan Residential, Global Front Towers is within walking distance to a major train station, offering direct access to shopping and entertainment hotspots like Ginza and Shibuya.
Tourism revival
Another factor in the growth of the real estate market has been tourism. This year alone, tourist arrivals have already surpassed 10 million visitors, government data shows.
For the first time in 55 years, tourism revenue has turned black with receipts exceeding 100 billion yen from April 2015 onwards.
“If you are thinking of investing in Tokyo, look at the popular tourism areas like Shinjuku, Shibuya, Ginza, Akihabara and Ryogoku. For instance, Ryogoku has lots of history and is known as the sumo wrestling area, while Akihabara is home to gadget stores and maid cafés,” said Adis.
With the upcoming Olympic Games, tourist arrivals are set to hit a new high, with a spillover impact on the property market.
“Hotels are expensive in Japan, so short-term stays will benefit tourists who prefer to stay for a week or two without burning a hole in their pockets.
“Apartments in Tokyo are very small, from 350 sq ft on average for studios, but this is a much better option compared to most hotels in Tokyo, as they are even smaller in size,” added Adis.
Prospective buyers searching for good investment opportunities in Tokyo can go to PropertyGuru’s overseas section, which features a list of Japanese properties available for sale: bit.ly/1M7e8SU.
CITY FAST FACTS
(TOKYO)
Population: Around 13.5 million
Total area: 2,188 sq km
Currency: Japanese Yen
GDP per capita: US$44,600 (2014)
GDP growth: 1.04 percent (2015)
Future transport: New Tokyo subway lines, to be built after the 2020 Summer Olympics
Home values: Down 0.5 percent in Q2 2015
Distance from Singapore: 5,311 km
Summary of major property related issues and taxes associated with real estate investment in Tokyo: bit.ly/1QZo6Uk
International Highlights
COMPLETED PROJECTS – TOKYO
Buying property in Japan is getting increasingly popular. We check out two apartment buildings that offer modern living with easy access to downtown Tokyo.
Yoyogi Park House Prime Hills
Shibuya Ward
Type: Apartment
Developer: Mitsubishi Estate
Tenure: Freehold
Facilities: Security entrance door, concierge service, car park, parcel lockers
Nearby Key Amenities: Yoyogi Park, Shinjuku entertainment and shopping area, Tokyo Opera City
Nearby Transport: Short walk to Yoyogi Park station (one station to Shinjuku)
Starting Price: US$1.07 million
Yoyogi Park House Prime Hills is an exclusive hilltop apartment building comprising 27 units of mostly two- and three-bedders that was completed in 2008.
Developed by leading Japanese firm Mitsubishi Estate, the freehold property is located in the heart Shibuya Ward, a popular shopping and entertainment district, and is close to Yoyogi Park, a large expanse of greenery. Some units offer park views.
The apartments are within walking distance to Yoyogi Park railway station, which is just one stop away from Shinjuku – a major commercial centre.
Sky Tiara – Residence in Forest
Itabashi Ward
Type: Apartment
Developer: Sumitomo Realty & Development
Tenure: Freehold
Facilities: Concierge service, community room, 24 hour mini-mart
Nearby Key Amenities: Shops and eateries at Seven Town, Itabashi Central General Hospital, Akabane Nature Park
Nearby Transport: Short walk to the Shimura Sakaue, Motohasunuma railway stations
Starting Price: US$411,390
Sky Tiara is a large freehold residential project of 621 units that sits on a land area of more than 172,000 sq ft. Approximately 51,000 sq ft has been set aside for landscaping.
Developed by Sumitomo Realty & Development, most of the apartments are bigger and appeal more to families. The building’s other features include a grand entrance, 24-hour mini-mart and community room.
Sky Tiara is a short walk from two railway stations on the Toei Mita Line (Shimura Sakaue and Motohasunuma), which offer direct access to shopping, dining and entertainment facilities in Tokyo.
 |
|||
 |
This article was first published in the print version The PropertyGuru News & Views.Download PDF of full print issues or read more stories now! | ||