Middle class buyers from China have invested in overseas property in the UK, the USA and Australia, however, the hottest place for the yuan right now is Japan. Over the last 12 months the Chinese middle class have started to heavily invest in Japanese property; in the first 3 months of 2015, the sale of Japan’s residential property to Chinese buyers rose 70%.
Why is Japan a popular place for Chinese investors?
Tokyo ranks as the most favourable spot for property investment and development in Asia due to its abundance of opportunities. Japan is an attractive investment for middle class Chinese buyers as housing is affordable in Japan’s first-tier cities such as Tokyo compared to China’s first-tier cities. Japan offers Chinese investors high-quality properties at affordable prices away from their tightly regulated home market; second home down payments reached 70% in some regions in 2013. In comparison down payments on property in Japan are generally low at 10%.
The Chinese middle class are heavily investing in Japan due to the deprecation of the yen against the yuan to a 22-year low; Japan’s weak currency is making properties cheaper to buy especially for foreign investors. As well financial support is aiding increased property investment by the Chinese in Japan; easy loan procedures and low interest rates. For example oversea buyers are now eligible for loans on property worth Also, with the Olympics being held in Tokyo in 2020, many Chinese investors see a positive return on their investment post-2020; cities that have held the Olympics often see their property prices rise afterwards. Japan’s property market unlike China’s offers good opportunities for capital gain and stable rental returns.
Effect of the Chinese buying Japanese Property
Partly as a result of the Chinese middle class heavily investing in Japanese property, Tokyo apartment prices have reached their highest levels since the early 1990s, up 11% over the last 2 years. This rise in property prices is affecting the domestic market with many Japanese not able to buy a home; property is very unaffordable for them. The percentage of Japanese wanting to buy a home in the one of Japan’s 7 biggest cities dropped to 15.4% in December 2014. At the same time this wave of foreign investment is causing demand to outstrip supply, with reports in some quarters of developers putting quotas on the number of new apartments sold to foreigners. The Chinese have the potential to change the dynamics of Japan’s domestic property market with Tokyo potentially rivalling others urban centres like Hong Kong, London and New York.
