The Japanese market is attracting a steady flow of Asia Pacific investors despite economic fluctuations
Amid economic uncertainties and fluctuating interest rates, Japan’s real estate market continues to captivate institutional investors and high-net-worth individuals from across Asia Pacific. This enduring interest is highlighted by significant investments even as the fourth quarter of 2023 saw a sharp decline in overall investment flows into Asia-Pacific real estate. According to AsianInvestor, despite these headwinds, Japan emerged as the top destination for cross-border investments within the region, attracting a whopping USD9.3 billion.
Kanu Gupta, Chairperson of the Singapore branch of TIGER 21, an exclusive membership network for entrepreneurs, investors, and executives, conveyed that the Japanese market holds substantial allure due to its recent strong performance and high-quality yields. He pointed out that, “Significant investment interest exists for Japan given how well the markets have performed recently and there is particularly strong interest in its real estate markets due to high-quality yields.”
Echoing Gupta’s sentiments, Joe Kwan, Managing Partner of Singapore-based Raffles Family Office, offering investment management services for ultra-high-net-worth individuals, remarked on the attractiveness of the core Asia Pacific markets. Kwan highlighted the potential within Japan and Korea’s residential rental sectors, fuelled by a cultural shift among the younger generation who increasingly prefer renting over homeownership. This trend boosts the long leasehold segment, benefitting the best operators in this space.
This is why The Straits Times has reported burgeoning interest from Singapore investors in Japan’s hospitality sector, capitalising on the country’s tourism boom. From ski resorts to beachside retreats and urban hotels, Singaporean investors are seizing opportunities across Japan. This vigorous investment activity occurs despite the Bank of Japan’s first monetary policy rate hike in 17 years, an action that preceded a significant surge in land prices — the largest in over 30 years during 2023.
Greg Hough, Managing Director of Niseko Portfolio and Explore Travel Group, and a Member of the PropertyGuru Asia Property Awards (Greater Niseko) Judging Panel, provided deeper insights into the market dynamics. Despite the rate hike, Hough explained that the direct impact on real estate was minimal: “Most of the investors are not able to access domestic finance and many of the current investors are not as focused on short term returns.” The more pressing issues, according to Hough, arise from increased land pricing, high construction costs due to a weak yen, and the scarcity of manpower and resources.
Related: Japan’s finest alpine real estate rises at the 2023 PropertyGuru Asia Property Awards (Greater Niseko)
Nevertheless, he acknowledged that “Japan is still very attractive to investors due to freehold ownership and solid capital gain prospects. The investor profile (within the context of Niseko) has changed in recent years, and we are seeing more lifestyle investors with lower short term return exceptions as well as larger regional developers entering the market with much longer-term strategies.
The aggressive tourism growth forecast is definitely creating excitement and investment opportunities and the price point in relation to land is still very undervalued in comparison to other developed regional markets.”
Powderlife, a Media Partner of the PropertyGuru Asia Property Awards (Greater Niseko), shed light on Japan’s ambitious goal to double foreign investment by 2030. This target, aiming to reach JPY80 trillion (USD531.8 billion), follows the success of previous revitalisation policies and is measured in terms of foreign direct investment stocks. The goal reflects a robust strategy to attract foreign capital, not just through relaxed residency rules for entrepreneurs, but also by enhancing access for high-net-worth individuals, such as easing entry requirements for private jets and facilitating accommodations for large yachts.
The 18th PropertyGuru Asia Property Awards Grand Final 2023 further showcased Japanese excellence in real estate development, with awards going to projects in Greater Niseko, such as for Best Housing/Landed Architectural Design awarded to Apex Property’s Hanacreek and Best Housing/Landed Interior Design granted to Takuetsu Co., Ltd.’s Aki Niseko, underscoring the region’s appeal and the innovative quality of its developments.
While Japan’s real estate sector navigates through the complexities of economic and policy shifts, the market’s depth and the strategic response from investors suggest a resilient outlook. With government initiatives aimed at boosting foreign involvement and a diverse investor base that is adapting to the evolving landscape, Japan’s real estate market is poised for continued growth and offers numerous opportunities for savvy investors looking to capitalise on its long-term potential.
Know of any award-worthy residential, commercial, or industrial projects in the country? Nominate them for the 6th annual PropertyGuru Asia Property Awards (Greater Niseko) on or before 13 Sept 2024. To know more, visit AsiaPropertyAwards.com/Award/GreaterNiseko/.
Gynen Kyra Toriano, Digital Content Manager at PropertyGuru, wrote this article. For more information, email: [email protected].