Institutional investors see Japan as a real estate darling but have turned cold on China’s property market

Both Japan and China have kept interest rates relatively low, despite US rate increases, weakening their currencies

Singapore-based institutional investors have been active in Japan, according to analysts at MSCI Real Assets conference

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People walking near the head office (C) of Japanese automaker Nissan Motor in Yokohama. Photo: AFP

Published: 9:30am, 9 Nov 2022

A weaker currency and low interest rates are drawing Asia-Pacific property investors to Japan, although similar factors have not helped China’s bruised real estate market, according to analysts attending an online conference by MSCI Real Assets.

Both Japan and China have kept interest rates relatively low, despite US rate increases, and both have seen weaker currencies as a result -normally a push factor for cross-border institutional investors.

The Bank of Japan has stuck to an ultra-loose monetary stance in recent times, with the yen falling at one point to a 30-year low against the US dollar. Meanwhile, China’s yuan fell to a two-year low against the greenback after the People’s Bank of China cut interest rates in August to 3.65 per cent from 3.7 per cent.

“The one market that stands out above all others is naturally Japan, with low borrowing costs combined with the yen slumping to a 30-year low,” said Ben Chow, head of Asia-Pacific real assets research at MSCI. “Virtually every client I’ve spoken to here in Singapore in the past two months is targeting the Japanese market.”

Singapore-based Q Investment Partners (QIP) is one of the institutional investors that have been active in Japan in recent months. With a US$40 million fund raised mainly from investors in Singapore and Hong Kong, the private equity firm acquired three multifamily assets in the Japanese cities of Osaka and Nagoya, according to Peter Young, QIP CEO. The assets comprise 207 units and have about 90 per cent occupancy as of June.

“We see a lot of opportunities in Japan. The US$40 million investment is the start, and we anticipate growing that north of US$100 million,” Young said in a video interview. “Our target is to build a portfolio … that’s really focused on the four major cities in Japan of Tokyo, Nagoya, Fukuoka and Osaka.”