The property market in Tokyo

Abenomics is fuelling a new wave of investment in Tokyo’s residential market.

8 April 2014, Words by Yolande Barnes

 

The residential market in Tokyo is gaining momentum and recorded a price rise of 4% in 2013 as Abenomics took effect, although this is modest by the standards of some fast-growing cities. In the short term, the market has been distorted by the April consumption tax rise, increasing from 5% to 8%. This has led to a short-term rise in buying and construction activity.

Buyers are also acting ahead of anticipated price increases, which are the result of improving economic conditions, and a view that mortgage interest rates are on the verge of rising.

In the residential rental market, prices have bottomed out and there are signs of modest price growth (0.4% in H2 2013), but any recovery will be dependent on how successful the government is at fostering income growth. Tokyo is attracting a new wave of Asian investors due to its relatively cheap residential capital values (a third of the cost of Hong Kong), stable rental income, strong yields (4.7%) compared to other major Asian cities and a weaker yen. There 
are no restrictions on overseas buyers and, from an institutional standpoint, Japanese lenders are eager to extend terms to quality foreign sponsors. Cross-border acquisitions made up approximately 10% of total investment in Tokyo’s residential sector last year, up from a low of 6% in 2011.

The 2020 Tokyo Olympic Games will help to maintain the momentum of Abenomics through the medium term. The majority of new infrastructure for the games will be focused around the Tokyo Bay area, on a relatively low-density string of reclaimed islands. A wave of new condominium development is expected to follow here, taking advantage of new investment in infrastructure and public amenity.

 
 

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