Despite the economic impact of the COVID-19 pandemic, the Japanese real estate market has remained stable. According to the Land Institute of Japan, the national house price index increased to 0.7 percent in inflation-adjusted terms in Q3 2020, up from 0.6 percent in 2019, 2.1 percent in 2018, and 2.4 percent in 2017.
While the legacy of the Great Recession continues to be felt globally, housing markets continue to suffer, and potential homeowners are feeling the pinch.
The Real Estate Economic Institute, a Tokyo think tank, said in July 2019 that the average guide price for a new apartment in Greater Tokyo was Y = 567.6 million.
According to a survey by the Global Property Guide, house prices in Japan increased by 0.8 percent year on year in 2020, a meager gain in comparison to other advanced nations, such as the United States, which increased by 10.3 percent.
As a result, while the housing market in Japan continues to rise marginally, real estate is transitioning from a deflationary to a growth asset.
Price in Japan increases
According to the Japan Real Estate Institute, urban housing prices nationwide increased by 0.4 percent in 2020, following a 0.6 percent increase in 2019.
The Greater Tokyo residential real estate market is predicted to maintain its current growth trajectory, with luxury apartment prices unlikely to dip in the near future.
Japan’s rising prices, openness to foreign investors, excellent architecture and homebuilding infrastructure, and increased resources for agencies acquiring akiya (abandoned, ultra-cheap homes) contribute to the country’s attractiveness to non-Japanese looking to invest in real estate, whether primary or secondary residences.
Influx of Buyers from nearby countries
China, Hong Kong, and Singapore provide a massive pool of investors interested in Tokyo’s luxury real estate market.
Chinese investors seeking to invest in Singapore real estate hit a record high in the second quarter of 2019, owing to China’s increased use of the Internet as a platform for overseas property acquisitions.
I believe this trend will continue through at least the first half of 2020. According to analysts, the increased number of Chinese purchasers in Singapore will have little effect on the local property market.
Yukihiko Ito, managing partner of Tokyo’s Asterisk Realty Placement Agency, anticipates that total Japanese real estate outflows will exceed US $10 billion (8.3 billion euros) in 2017, with 60-70 percent of the total coming from direct purchases and the remainder from investment in real estate funds.
Although less than a third of Japan’s large insurance companies have began investing in global real estate, ito predicts that by 2018, 70-80% of them would.
While real estate developers continue to target high-income expats and Asian investors, as well as wealthy Japanese, the vast supply surplus creates an opportunity for Japan’s sizable middle class.
Concern over Japan’s ageing population
Despite concerns about Tokyo’s ageing population and economic deflation forecasts, many local and international investors are attracted to Japan’s real estate investment potential.
Japan has been the world’s most productive real estate investor in numerous worldwide markets since the 1980’s, but Singapore and China have overshadowed it in recent years. Japanese foreign investment in real estate is primarily indirect, instead of the $91 billion in direct real estate investment between 2012 and 2016.
Good Government leads to Singapore property growth
While Singapore offers excellent real estate investment opportunities, a cursory examination of the Japanese real estate market, particularly the luxury real estate market.
Some of the most rewarding investments can be made, revealing that returns are less impressive due to the country’s higher cost. A significant factor contributing to this disparity is Singapore’s more comprehensive housing regulation, which includes many measures designed to deter foreign investors and affluent individuals from driving up prices.
Due to the boom and high house prices, the housing market is unable to generate a significant portion of tax revenue.
Although the impact of Shinzo Abe’s deflationary policies on the general economy is debatable, they have helped to firm up Japan’s property market in recent years.
Because homes are viewed as a sound investment and a means for households to store wealth as it grows, a severe decrease in property values is unknown.
High house prices also act as a vehicle for wealth transfer from young to old, poor to rich, and people who do not own homes to those who do.
Shorter Property cycle
Economic and credit cycles come and go, but if the government is serious about increasing housing affordability, developers must make it easier to sell homes.
Japan’s combination of pro-growth economic policies, openness to international investment, and growing prices in the luxury real estate market has created an optimistic environment, while Singapore has an unmatched upstart dynamic.
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The Bank of Japan’s policy of zero interest rates has made it more difficult for businesses to manage their assets, notably residential real estate. In December, the Government of Japan Pension Fund (GPIF) launched its first domestic real estate fund, the Mitsubishi UFJ Trust Fund of Mandate in Japan (M-u’mizuma UFJ Trust).
The Ministry of Land, Infrastructure, Transport, and Tourism has placed abandoned houses and flats on the market in an effort to minimize the total number of abandoned houses and apartments. In Taiwan, the tax system has positioned real estate investment as an efficient means of avoiding taxes and saving money, encouraging capital to flow into the real estate sector. To promote the housing market, the property tax rate was halved in 2001.