Homing in on Japan

Chinese buyers, including Hongkongers, take a punt on country's property market rebounding in line with Abenomics push to beat deflation

PUBLISHED : Tuesday, 06 August, 2013, 12:00am
UPDATED : Tuesday, 06 August, 2013, 5:08am

When Julia Chang, a Taiwanese who divides her time between Taiwan and Tokyo, decided to diversify her family's investments, she settled on property in the Japanese capital where prices have slumped for two decades.

Chang, 48, a former flight attendant, is looking to buy her third flat in Tokyo, which is increasingly attracting foreign buyers after Prime Minister Shinzo Abe took office in December with a pledge to end the deflation that has depressed real estate. "Tokyo properties make a good investment because they are relatively cheap," said Chang, from her 170 million yen (HK$13.3 million) three-bedroom flat in central Tokyo. "It's a bargain."

Asian investors like Chang are being lured by returns as high as 8 per cent on rental income and signs the market is recovering. The government's resolve to keep the yen weak has also made property in Japan more affordable compared with Hong Kong, Singapore and Taiwan.

"Japan is cheap considering how much property prices have gained in Singapore and Hong Kong," said Akihiko Mizuno, international director and head of capital markets at Jones Lang LaSalle. "They expect to receive stable rental income and also have an expectation that prices will rise."

Home prices in Tokyo were about 120,000 yen to 150,000 yen per square foot, Jones Lang LaSalle said. That compared with the equivalent of 280,000 yen to 400,000 yen in Hong Kong and 200,000 yen to 250,000 yen in Singapore, it said.

Prices in the major cities are still less than half their peak at the height of the 1980s bubble economy. The average price of a three-bedroom flat in Tokyo and surrounding prefectures rose 7.9 per cent in June from a year earlier to 48.3 million yen, the Real Estate Economic Institute said.

A unit of about 1,000 square feet in Taipei cost about NT$19.5 million (HK$5.03 million) in June, Taipei-based Sinyi Realty said. A flat of about 1,000 sq ft on Hong Kong Island cost an average of HK$19.1 million in May, the Ratings and Valuation Department said. In Singapore, a new flat of that size could sell from S$1 million (HK$6.09 million) to S$1.2 million, Savills said.

Sinyi, Taiwan's biggest listed property broker, started selling properties in Japan to buyers from the mainland, Hong Kong and Macau, as well as locally, in 2010, managing director Kenny Ho said.

Sinyi handled 11.3 billion yen of properties in Japan in the first six months of the year, against 8.6 billion yen for all of last year, Ho said. The weaker yen had made flats in Tokyo about 15 per cent cheaper than last year, he said. "In some cases, our clients have to enrol into a draw and compete with Japanese buyers to acquire new properties," he said.

Chang's HK$13.3 million flat, in Koujimachi in Tokyo's Chiyoda-ku district, has a view of the Imperial Palace. A nearby flat offers a return of about 5.1 per cent, according to Sinyi.

"When making an investment, you want to buy when prices are low and with relatively low risks," said Chang. "That way, it has more room for prices to go up. Besides, Tokyo is one of the biggest cities in the world."

A one-bedroom flat that cost less than 50 million yen could offer a return of about 6 to 7 per cent, while the mortgage rate was at about 2.5 to 3 per cent, Ho said.

CTBC Financial, one of five Taiwanese lenders with branches in Japan, said the number of mortgage loans and the value of mortgage lending in the nation tripled in the first half from the same period last year.

The bank was offering a floating mortgage rate of 2 to 3 per cent, tied to the one-month Tokyo interbank offered rate, said loan officer Keiken Matsumoto.

Mizuno said Jones Lang LaSalle had also started marketing flats in Japan to Hong Kong investors following successful promotions in Singapore.

Tokyu Livable, a Tokyo-based broker that opened an office in Shanghai last year began to sell flats overseas for the first time this year, senior executive director Toshihiko Kitagawa said. It had also conducted sales drives in Hong Kong and Singapore, Kitagawa said. "We are selling quite well since the start of the year," he said.

Japan's largest developers were set to benefit from rising home sales, Deutsche Securities analyst Yoji Otani said.

Sumitomo Realty & Development, the third biggest, had the biggest land bank in greater Tokyo with the potential for about 30,000 flats to be built, Otani said. Mitsui Fudosan, the second largest, and Mitsubishi Estate had the capacity to build as many as 15,000 flats on the land they held, he said.

Ho said: "The surge in sales we have seen has a lot to do with Abenomics. Even after the cost of borrowing, our clients can get a rental income of at least 4 per cent."