Foreign Investors Driving Tokyo’s Luxury Property Market

Investment Properties Japan

Real Estate Investment Japan

01 Feb, 2019 –

More than 25 years after its bubble economy burst in spectacular fashion, Japan is still seen by many as a kind of economic cautionary tale, a country in a perpetual malaise, undergoing a long, slow deflationary spiral as its population shrinks and grows older. And yet, a split second in Tokyo reveals a city that could never feel stagnant, grey or moribund. From the glittering shopping temples of Ginza to the controlled chaos of Shibuya; from pop culture to ultra-refined design aesthetics to the world’s highest number of Michelin-star restaurants, few – if any – global cities can match the sense of energy and invention that Tokyo radiates in a neon-bathed glow.

The world has certainly taken note. Tourism is skyrocketing in Japan, with international visitors reaching a record high of more than 24 million in 2016. Tokyo, meanwhile, is preparing to flaunt its brand on the world stage again when it hosts the 2020 Olympics. Since taking power 2012, the reflationary policies of Prime Minister Shinzo Abe, dubbed “Abenomics”, have brought mixed economic results. However, the property market has been an undoubted beneficiary with demand and construction activity booming. Abenomics is based on “three arrows” of policy – devaluing the yen, increasing public infrastructure spending and quantitative easing by the Bank of Japan.

Incredibly low borrowing rates, a weak yen, and a slew of redevelopment and real estate investment projects saw transactions picking up in 2012 and rapid growth beginning in 2013.While some regions of the country are still shuffling along, the impact has been especially concentrated in the 23 wards of metropolitan Tokyo, and even more so inside the capital’s five central business districts of Chiyoda, Chuo, Minato, Shinjuku and Shibuya. The average price of a new condominium in the Tokyo metropolitan area has grown more than 35 percent between January 2013 and August 2017, according to figures from the Japan Real Estate Institute, from around JYP47.2 million (USD417,720) to JYP58.2 million.

Land prices have also risen consistently year-on-year since 2013. Land in the Ginza shopping district is among the most expensive in the world with prices per square metre hitting up to a staggering JYP40.3 million. The question now, for many observers, is whether the market has already peaked. New condo sale prices in Tokyo’s 23 wards grew at 4.3 percent in 2013, 6.1 percent in 2014 and 8.9 percent in 2015. However, they leveled off in 2016, at -0.1 percent, with a couple of sharp contractions at the end of the year, dropping 4.5 percent in November and another 1.6 percent in December. Prices ticked back up again in 2017, but have seen more month-to-month fluctuations than in previous years.

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