Although Tokyo’s attractiveness as a destination for residential real estate investors is sometimes divisive, its main strengths of having a highly liquid markets and a wide yield spread mean that the city often allows for good returns.
When naysayers express concern, this is usually premised on growing scepticism over the ability of Abenomics to cure Japan’s economic ills, together with a lack of willing sellers in the current negative-interest-rate environment. Such sentiments are understandable, because it is probably likely that most owners are in no rush currently to sell away their assets, whilst at the same time there is limited buying pressure amongst entrants.
Nonetheless, Tokyo homes continue to provide healthy returns and liquidity, see high occupancy rates, and generate reliable rental income streams. All of these bolster their position as safe bets in a market where long-term fundamentals are being questioned.
Key to these thoughts about fundamentals is the question regarding the country’s economic prospects. On the other hand however, fund managers active in the real estate sector seem sanguine that there will be large amounts of new capital injected into the market in the coming years, which will be a net positive to prices and give the market some tailwind.
One commonly cited example is the Government Pension Investment Fund (GPIF) of Japan. While the GPIF has a global mandate, it is likely that managers cannot be putting the bulk of the money into overseas assets like in the US. Most observers expect that the bulk should still stay within the country, so Japan will still be the recipient of most of the funds, providing floor support to the price levels in the country.
Nonetheless, Tokyo’s housing market is likely to moderate after investment grew at its fastest in five years in April-June last year, but the benefits to consumer spending and employment could continue into this year due to the Bank of Japan (BOJ)’s negative interest rates. While the BOJ courted controversy by pushing rates below zero, putting banks offside in particular, the policy has proven a hit with first-time homebuyers and homeowners looking to refinance mortgages. Moreover, a rise in long-depressed property prices is causing some people to buy sooner, rather than later, which should lift demand for durable goods such as appliances and furniture—just the recipe to break Japan’s deflationary mentality.
This has been confirmed by retailer Ryohin Keikaku Co, which includes the Muji chain of stores. Furniture sales in particular, have been said to be doing well, and the company cites a healthy housing market, especially in Tokyo, to be one of the reasons why. The company has also expected such trends, having spent many years improving training for its furniture sales staff.
Lower rates have also sparked a more optimistic buying spree in residential real estate. Bank of Tokyo-Mitsubishi UFJ, a unit of Japan’s largest lender, has cut its prime lending rate for a 10-year fixed-rate mortgage to a record low of 0.5%. Mizuho Bank, its main rival, is charging 0.65%, and Sumitomo Mitsui Bank has 0.7%. A strong interest has been reported and residential property prices have been rising for the past three years in Tokyo.
ON THE MARKET
Majes Tower Roppongi
Situated in the highly sought-after area of Roppongi, the Majes Tower development from one of Japan’s biggest contractors, Tokyu Land looks set to be a coveted address. Known as a centre for culture, retail and business with reputed names such The Ritz-Carlton, Goldman Sachs and Apple in the neighbourhood, residences can enjoy a lifestyle like no other when buying in Roppongi. Alongside Michelin-starred restaurants, high-end shopping and city-life entertainment, the transport network is very practical, with the nearest station being a short four-minute walk away and thus an easy connection to all of the city’s major hubs.
The 27-storey residential tower has undergone a complete refurbishment since its construction in 2006 and now offers the luxurious living expected by the city’s most notable expats, CEOs and HNWIs. Boasting 83 units from studio to 2-bedroom abodes, it will attract investors both for its beautiful design and exceptional facilities such as the state-of-the-art gym. The stand-out façade sits well amongst Tokyo’s other skyscrapers, but the real wonders lay inside.
Light and contemporary, each condominium features up-to-date design that is mirrored in the communal areas of the building. An added bonus for the middle and higher floor levels are the stunning views of Roppongi, Shinjuku and Shibuya, as well as Tokyo Tower and Mt. Fuji. For a 459 sq. ft. studio, prices begin at JPY 82.5 million (approx. USD 756,881) whilst a larger two-bedroom premium unit of 1,202 sq. ft. requires a JPY 296.2 million (approx. USD 2.72 million) investment.
With high-end rental in high demand, and the market being the most expensive in Japan, the property is a worthy investment as well as those looking to live in one of the most desirable locations of Tokyo.
For more information:
www.jllresidential.com/sg/ips / Tel: +65 6494 3556
The Chiyoda Kojimachi Tower
The Chiyoda Kojimachi Tower is located in the historic Kojimachi neighbourhood of Chiyoda ward. The area encompasses the Imperial Palace, diplomatic quarters and was previously the birth place of numerous key political figures in Japanese history. With prices ranging between USD 880,000 to USD 2.2 million and spaces of 53.37 sqm to 90.12 sqm (approx. 574 sq. ft. to 970 sq. ft.) per apartment, this elegant development boasts interiors by Studio Sawada Design, known for their work on the MGM Grand in Las Vegas, the Four Seasons in Shanghai and the Mandarin Oriental in Tokyo. All units are fitted with private balconies and floor-to-ceiling windows, whilst those from the 17th floor and above will offer expansive views of the Tokyo skyline. A dedicated concierge will also see to daily wants, including room service, hair care, pet grooming, dry cleaning, housekeeping, baby-sitting and more. Situated on a quiet, leafy street just steps away from sought after schools as well as various lifestyle amenities, the 23-storey tower even features its own exclusive exit from the Kojimachi station, allowing for discreet and convenient travel. With 83 units due for completion in December 2018, apartments will be ready for delivery to buyers from February 2019.
For more information:
www.hjrealestate.com.sg / Tel: +65 6235 6866
This article was first published under Special Features in Palace 19.