Tokyo property market seen attractive ahead of 2020 Olympics

With Tokyo set to host the next Games, the president of Japanese property agent Daikyo Anabuki Real Estate, Kazuhiko Kaise, believes the Japanese capital remains attractive for investors

PUBLISHED : Wednesday, 22 July, 2015, 12:01am
UPDATED : Wednesday, 22 July, 2015, 12:01am

Hong Kong investors have been on a treasure hunt in the Japanese property market due to the sharp fall in the yen and the huge price gap between the city and Japan.

Holidaymakers in Hong Kong view Japan as one of the most popular destinations for holiday breaks, shopping and tasting Japanese food.

Today, the trend is expanding to shopping for Japanese properties where prices have dropped about 70 per cent from their peak in 1989.

In stark contrast, Hong Kong home prices have more than doubled since 2008 and keep on climbing to fresh highs despite the government introducing a slew of measures to cool the real estate market.

Japanese residential properties provide rental yields as high as 8 per cent, compared to Hong Kong's 1 to 2 per cent.

According to Savills' first-quarter report on the Japanese residential leasing market, home rents are expected to grow at a faster pace because of shrinking household sizes in centrally located areas in Tokyo that are supporting the mid-market.

The uniqueness of Tokyo is its population movement. The population of Tokyo has been on the rise, despite an overall decline in the country as a whole.

The Tokyo metropolitan government estimates 13.4 million people reside in the Tokyo prefectures as of March 1 this year, up by 0.7 per cent from a year earlier, while Japan's total population contracted by 0.2 per cent on the year.

A key driver for residential leasing is the projected growth in the number of households, said Savills. It noted demand for multifamily rental housing in Tokyo seems to be stable for the foreseeable future, not only because of shrinking household sizes, but also due to continuous urbanisation and net migration.

Kazuhiko Kaise, a director and president at Daikyo Anabuki Real Estate, the realtor arm of Daikyo, believes Tokyo remains an attractive location for investors. Prices of new homes jumped more than 14 per cent in the past three years, and will continue to rise.

 

The Olympic Games will be hosted by Tokyo in 2020. Will this help boost the residential market?

Definitely. We have seen increasing numbers of companies at home and overseas sending their staff to Tokyo where we have various large-scale infrastructure projects under construction. According to Knight Frank's Prime Global Rental Index, in the last quarter of 2014 luxury residential rents in Greater Tokyo Area grew 11 per cent, outperforming Hong Kong and London.

What is the performance of the secondary residential market?

We have conducted a survey on price movement in the secondary residential market. The results showed that prices for second-hand homes in Tokyo's 23 special wards rose more than 20 per cent since 2012. Of the total transactions, more than 70 per cent of the units went for more than 30 million yen.

Will the housing market also attract institutional investors?

According to a Japanese government survey last year, residential properties topped investors' interest which indicated their optimism towards the market outlook. Listed companies and real estate investment trusts acquired five trillion yen worth of properties last year, of which 20 per cent came from foreign investors. It sends a strong signal of investor confidence towards the property market's prospects.

What kind of properties would achieve better upside potential?

Prices for new flats are getting expensive due to soaring construction costs and insufficient supply. Since 2012, prices for new units in Tokyo have risen more than 14 per cent owing to lack of supply. We believe secondhand units in Tokyo will remain sought after as they offer an investment return of more than 5 per cent a year.

How many branches does Daikyo have in Japan?

We have 4,000 branches around different parts of Japan. Our units available for sale or lease will match the demand for clients who look for medium or long-term investments.

Can you give some advice to first-time investors of Japanese property?

For the first-time investor, it is better not to go for units which involve large amounts of money. Location is very important as it will affect the resale value and those in prime areas will stand a better chance of finding tenants. Potential buyers could purchase a studio flat in a good location with a budget of 30 million yen.

How much can buyers secure in terms of mortgage financing from banks?

Most banks are offering a mortgage loan of 60 per cent of the flat value to assist home buyers to complete the transaction.

Can you tell us about Daikyo's background?

Daikyo was founded in 1964. It is a listed conglomerate with businesses in property development, real estate brokerages, leasing and selling property units. It has provided an accumulated 520,000 flats.