Overseas investors pull away from Japan property market

November 04, 2016 Japan

The booming Japan property market reaches a halt as overseas property investors pull their investments because of skyrocketing real estate rates.

Japan Property Market | Overseas Property Investment | Asia Properties

According to Nikkei property news, investors are now shunning the Japan property market as real estate prices reach an all-time high. With the yen becoming stronger, Japanese properties have become much pricier. In fact, office buildings in Tokyo are now priced 20% higher than they were four years ago. Prime rents are also growing with a 9% year on year growth in the second quarter, and are thus the fastest among Asia properties.

This was illustrated by the alarming plunge in overseas property investments this year. From January to September, foreign investors sold off 595 billion yen more than they purchased, according to the Urban Research Institute of Mizuho Financial group. This beats the previous record of 330.1 billion set in 2013.

With the present rates in the Japan property market, investors are taking advantage to make profit. Overall real estate sales for this year totalled 752 billion yen. But the main problem is that overseas property investors have simply lost appetite for investing in Japan property. The local working population is also finding it more difficult to make property investments in their own country and therefore slowing down demand.

Bernie McNamara from J.P. Morgan Asset Management says that this might signal the end of the booming Japanese property market. In fact, his company is already preparing for it by reducing high-risk property investments and focusing on properties that have done well long-term.

On the brighter side, domestic real estate investment trusts remain to be active buyers of the Japan property market. Regional banks that are struggling due to the incredibly low interest rates are now stepping up with property investment. Bank of Japan is already increasing REIT prices, spurring new share issues to increase capital.

Only time can tell if the Japan property market will continue with their slowdown or pick themselves back up. Meanwhile, keep updated with the latest updates about properties in Asia or Japan property news by visiting our blog.