Hot Investment Property in Japan

Fifteen years ago the economic miracle that was Japan ceased to be.  The country’s economy crashed and its property market went into decline losing 75% of its value and directly incurring record billion dollar losses for banks and financial institutions who had leant money on the back of the real estate industry.

Thankfully Japan pulled out of its recession in 2004 and today the economic forecast for the country is incredibly strong.  Global financial giants like Goldman Sachs and Morgan Stanley are pouring money into the country, buying up real estates assets and boosting investor confidence in the property sector and the country as a whole.

All the conditions for hot investment property to thrive are right - interest rates are at record lows boosting lending figures and the property market as a whole, residential and commercial land prices are rising increasing investment returns, rental demand is increasing which restricts supply and allows for price increases, and as mentioned there is massive inward foreign real estate investment from the likes of Goldman Sachs, Lone Star and Morgan Stanley.

These giants are investing over seven billion US dollars in commercial buildings, lending companies, retail outlets, office blocks and resorts across Japan with most investment currently focused in the major cities of Tokyo and Osaka.  And with Goldman and Morgan Stanley setting the trend, international corporate investors and private investors are hot on their heals keen to take advantage of the significant gains in residential land prices, rental prices and commercial property prices that the country is already witnessing.

Because the real estate industry in Japan suffered such extreme losses and property assets declined in value so significantly there is massive room for recovery and growth which means that potential returns are highly likely to outstrip those possible in the real estate markets of New York and London.  Already rental returns are topping those achievable in these cities with office buildings in Tokyo seeing annual rates of return between 1 and 2 percentage points higher than similar buildings receive in either London or New York…and this is only a few months into what is expected to be a very long recovery period.

Foreign fund managers like Dekabank Deutsche Girozentrale and Starwood Capital Group have already made significant real estate investments in Japan and real estate funds managed by the likes of Lone Star and Goldman are committing significant percentages of their property funds for investment in Japanese property for the foreseeable future.  In turn Japanese property owners are seeing asset growth which is increasing their confidence and which is leading to increased consumer spending resulting in further economic strength for Japan. 

Finally Japan is recovering from its 15 year decline which points to the fact that those wise enough and swift enough to snap up investment property in Japan are probably set to profit substantially.  As the global financial giants mentioned in this article would point out, no investment is guaranteed, however all the signs seem to be pointing towards significant recovery and healthy growth.

This article was written from facts detailed in the Herald Tribune article “Japanese property is rebounding”.