Why are more and more people investing in Japanese real estate?

In the tide of globalization, the real estate market has become an important link between the economies and cultures of different countries.

Despite the challenges of inflation, political instability and a potential economic slowdown, Japan has shown remarkable resilience. Against this backdrop, the Japanese real estate market, particularly in Tokyo and Osaka, has become a focal point for global investors.

📊 In the first quarter of 2023, total real estate investment in the U.S. and Europe decreased by 61% and 58% y/y, respectively, and investment in the real estate sector in Singapore and South Korea declined by 67% and 70% y/y, respectively.In Japan, during the same period, investment in real estate increased 43% y/y, with investment from overseas nearly doubling. Investment from overseas almost doubled.

📊 According to the Nihon Keizai Shimbun, property transactions in Tokyo and Osaka increased by 30% year-on-year in the first half of 2023, thanks in large part to the active participation of Chinese buyers.

Media analysis points out that there are many factors that drive the rise in Japan's housing prices, for example, the price of land, the continuous rise in construction costs, luxury properties go on sale one after another, and there is one thing that cannot be ignored - it is the demand of overseas investors to buy houses.

01

Rising land prices

According to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT)'s land price announcement for FY2023, Japan's all-purpose land prices rose by an average of 1.61 TP3 T, residential land by 1.41 TP3 T, and commercial land by 1.81 TP3 T. For the second consecutive year, these increases have been realized, and the rate of growth has expanded in each case.

02

Rising construction costs

Due to the continued depreciation of the yen, new homes are more sensitive to the cost of raw materials, unlike completed homes. The yen has experienced a sustained depreciation, coupled with high commodity prices in the year, the cost of construction in Japan has risen sharply. The high cost of the building was completed and launched in 2023, which directly led to a step up in home prices.

03

Overseas investment "influx"

Overseas investment "influx" of Japanese real estate for the rise in Japanese housing prices "not to be missed". The depreciation of the yen "in exchange for" the appreciation of the real estate, overseas buyers this is an attractive investment.

The Bank of Japan has maintained low interest rates and an ultra-loose monetary environment, and the yen will continue to depreciate relative to the U.S. dollar in 2023, making "Japanese real estate" attractive to U.S. investors.

📑 Media reports say:

- The U.S. Blackstone Group owns more than one trillion yen in real estate in Japan, including investments in condominiums, office buildings, and data centers.

- Singapore's investment capital QIP has launched a fund targeting residential properties in Japan's major cities, with investments totaling $40 million.

It has been pointed out that in 2024, the dollar to end the interest rate hiking cycle, the Bank of Japan to exit the negative interest rate policy, together to stimulate the yen rebound, even if the financing rate rose slightly, but compared to the global high-interest financial leverage, Japan's "low interest rate puddle" attribute is still very prominent.

04

Continued net inflow of population

For the fourth consecutive year, Tokyo was ranked No. 1 in the 2023 ranking of Attractive Cities for Investment Destinations in Asia-Pacific.

Image Source: Internet

At the same time, Tokyo's continued net inflow of population has also become a factor in pushing up the price of Tokyo, data show that the Japanese currently 122 million people while living in the Tokyo metropolitan area has more than 38 million people, accounting for nearly 30%.

Against the backdrop of 12 years of negative population growth in Japan, Tokyo continues to experience a net inflow of people, which explains the high prices of new condominiums in the 23 wards of Tokyo.

For Japanese home prices in 2024, analysts point out that as Japan further restricts the daily working hours of truck drivers and construction workers, labor costs will increase further, which will be passed on to homes and inevitably lead to further increases in home prices.

05

Investing in Japanese real estate to obtain status

The Japanese government has joined the global rush to attract more talented people from overseas in hopes of easing the shortage crisis.

Japan's social benefits are among the highest in the world, and more and more investors are considering immigrating to Japan to realize the "double insurance" of identity + wealth for the whole family.

After obtaining the Japanese management visa, the investor can obtain the status of residence in Japan, thus realizing the goal of immigrating to Japan. At the same time, the investor will be able to join the Japanese social insurance system and enjoy the same national treatment in terms of medical care, maternity, and pensions.

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