Tokyo property market set for Olympic bounce

PUBLISHED : Tuesday, 18 June, 2013, 7:43pm
UPDATED : Tuesday, 18 June, 2013, 9:26pm

Japanese media is full of speculation that Tokyo may trump the other shortlisted cities of Istanbul and Madrid to host the 2020 Olympic Games. The IOC’s focus on safety and security will no doubt be a major factor, considering the current instability and civil unrest in the Turkish and Spanish capitals.

An IOC veteran from Europe was quoted by Japanese media as saying that Tokyo was within reach of winning the bid, while another high-ranking member was reported as saying that Tokyo would triumph as long as it did not make any big slip-ups ahead of the September vote in Argentina.

Tokyo estate agents, starved of good news for a quarter of a century are suddenly rubbing their hands in glee.   “This would have a large effect on Tokyo real estate, especially around the Tsukiji fish market area, as that market is slated to be redeveloped and used as the primary venue,” says Tokyo agent Erik Oskamp.

The property market in Japan has been in a slump so long it’s down 80-85% from 24 years ago. “This correction was long overdue,” says Oskamp, with much understatement. Even without the Olympics, Tokyo property is experiencing a leg up this year, thanks to Abenomics.

But it’s coming off a very low base and property is still catching up with the financial markets, with prices rising fast, Oskamp says.  “It looks like all the money the Bank of Japan is printing is going into property.” He’s also sees the first signs that rents have stopped falling and that deflation might be ending, at least in Tokyo. Compared to Hong Kong, the prices look unbelievable.

Small Is Beautiful

Remember Tokyo city centre apartments are small, but that’s the way the Japanese like them. You can buy a 21.36 square metre pad in CHUO-KU, KACHIDOKI 2-4-9 for 8.5 million yen. That rents for 80,000, giving a gross yield of 11.29 per cent, or a real return on investment of 8.14 per cent, with tax and agent fees deducted. Not only is it close to the Tsukiji fish market and to Kachidoki station on the Oedo subway line, but the tenant has been there for 20 years.

Another great buy on Oskamp’s books is a 42.57sqm apartment in SHIBUYA-KU, SAKURAGAOKACHO 31-8, price  22.5 million yen. The rent is 150,000, giving gross yield of 8 per cent, and ROI of 5.54 per cent. This place is just 450 meters from Tokyo’s Shibuya station, right in the centre of town.

Here’s one that sounds like pocket money to a Hong Kong investor. A bijou 12.25sqm flat in CHUO-KU, SHINKAWA 2-11-1, asking price 5.2 million yen. Rent is 45,000, giving gross yield of 10.38 per cent, or ROI 6.86 per cent. 

Remember small is beautiful in Tokyo flats. Oskamp only handles foreign buyers, which represent less than 1 per cent of the overall transactions in Japan. He is confident the current sudden upswing in momentum will continue for some time to come. “My guess is Tokyo will be one of the best performing real estate markets in the world for 2013 and probably 2014 while overvalued markets like Hong Kong, Singapore, Canada, Australia, the UK, and France will struggle,” he reckons. Only the US and Germany housing markets are in a similarly favourable position. For more on the Japan property read the Money section in next Monday’s SCMP.