Hong Kong investors keen on Japanese property

The rising Japanese yen and falling home prices in Hong Kong have not deterred local investors from buying Japanese properties, industry experts say, because flat values in the city are still high, which compresses annual yields.

“Despite declining Hong Kong home prices, we have not seen lots of buyers return to the local residential market so far,” Landscope Christie’s International Real Estate chief executive Koh Keng-shing said.

Hong Kong’s home sales had been dominated by the primary residential market, he said, as developers had reduced selling prices and provided stamp duty subsidies to lure buyers away from the secondary market.

There had also been a subdued response to sales in the secondary residential market due to higher transaction costs, Koh added, pointing out the local market was focused on end users.

He said investors were still interested in buying overseas properties as a major investment alternative.

“The surge in the Japanese yen has little impact on their investment,” he said. “In contrast, some investors have become more active in looking for properties in order to bet on the stronger yen.”

The yen surged to an 18-month high of 105.79 to the US dollar on Tuesday after the Bank of Japan failed last week to deliver the further monetary easing expected by the market. In Hong Kong, home prices have fallen about 12 per cent from the September peak.

Koh said investors could enjoy a currency gain even if home prices in Japan failed to rise.

Property appraisal firm Tokyo Kantei said home prices in the secondary market in the greater Tokyo area rose 7 per cent last year.

Koh said the annual investment yield for residential flats in Tokyo would be one to two percentage points higher than Hong Kong’s average of two or three per cent, while yields in Osaka could be two to three percentage points higher than those for investment properties in Hong Kong.

He said Japanese flats ranging in price from HK$5 million to HK$10 million were the most popular among individual Hong Kong investors.

Institutional investors had recently showed interest in Japanese properties such as car parking spaces, student quarters and elderly homes which offered more attractive yields than commercial properties, he said.

Foreign investors, including those from Hong Kong, flocked to Japan after 2012 as a falling yen made properties there more affordable.

Home prices in Japan are just a fifth of those in Hong Kong and are also lower than those in mainland China’s first-tier cities such as Shanghai and Beijing, but come with high occupancy rates, with almost 90 per cent of rental units in Tokyo leased.

Due to an increasing number of Hong Kong buyers, leading Japanese developer Daikyo has expanded its real estate brokerage business to the city, opening an office in Hong Kong in May last year.