2014 a record high as ¥1 trillion of foreign funds invest in real estate

Buy Japan as the weaker Yen continues

There has been a rapid increase in the foreign investment of Japanese real estate. Acquisition of Japanese real estate by foreign companies reached a record setting ¥1 trillion in 2014, roughly three times higher than the previous year.

Against the backdrop of a weaker yen, etc., the “buy Japan” trend continued, with foreign investment accounting for about 20% of all real estate transactions in Japan.

According to the Urban Research Institute Corp., which is part of the Mizuho Trust & Banking group, acquisition of real estate by foreign corporations reached ¥977.7 billion last year. This is an 80% increase from 2007, which was the previous high since comparisons became possible in 2005. At the same time roughly ¥2 trillion of “inbound demand” from foreign tourists to Japan supported overall higher consumption, it has become impossible to ignore the presence of foreigners in the real estate market.

Among the many purchases by overseas investment companies and financial institutions, investors from China and Asia have stood out. In December of last year, Fosun Group, a Chinese investment company, together with U.S. investment funds, each purchased from Japan Tobacco (JT) a total of three office buildings in the Shinagawa Seaside Forest complex for just under ¥70 billion. Last October, Singapore’s GIC Private Ltd. bought the commercial-use section of Pacific Century Place Marunouchi in front of Tokyo Station for about ¥170 billion.

Overseas money is directed to real estate because it is easy to predict that land prices and office building rents will increase as Japanese corporate results improve as well as the Tokyo Olympics which will be held in 2020.

The weaker yen also lightens the investment burden for foreign interests. If looked at in yen, Japanese real estate prices and rents give the strong impression of being undervalued compared to the major cities of the world. According to the Japan Real Estate Institute, if in yen terms you compare office rents from October of last year, and Tokyo is 100, then Hong Kong was 165.6, and London was 146.0.

Mr. Shigeo Hirayama of the Urban Research Institute Corp. said, “because of the monetary easing in major countries, fund raising is easy,” which is also a factor in the increasing attractiveness of real estate investment.

Individuals from overseas have also increased their presence. At the tower condominiums Deux Tours Canal & Spa in Harumi, Tokyo, a project currently being sold by Sumitomo Realty & Development Co., purchases by Chinese have been much more prevalent then prior periods.

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