Japanese residential property transactions hits highest recorded value in 2020

Analysis of the entire Japan real estate market in 2020 shows the total value of transactions remained at the same level as the previous year with a marked contrast between sectors.

The year 2020 was dominated by the topic of coronavirus. Despite fears of a major impact on the real estate market, the year ended with transaction values on a par with 2019. Acquisition of office buildings and residential properties was active, especially by international companies, and frequent mega-deals boosted the total value.

In 2020, the number of transactions, as collected by Nikkei Real Estate Market Information, was only 1,420, the lowest since 2013, while the total transaction value was 3,716.7 billion yen, up 2% from the previous year.

By property type, in order of value, 36% were offices, 22% logistics, and 20% residential. Of these, residential transactions recorded the highest amount of 737.3 billion yen since the data was first compiled in 2002.

The market was led by the Blackstone Group. The US investment management company bought back a residential portfolio of 220 buildings from its former owner, China’s Anbang Insurance Group, in a deal worth around 300 billion yen, the highest-valued transaction recorded since the financial crisis.

Other acquisitions included a mixed portfolio of 18 properties worth approx. 110 billion yen from PAG, a major Hong Kong investment fund, and an approx. 55 billion yen investment by Daiwa House Industry.

AXA Investment Managers, a French multinational insurance firm’s investment branch, made six investments in Japan during the year, totalling 173 billion yen included approx. 70 billion yen on a residential complex in the Tsukuda redevelopment area, Chuo-ku, Tokyo.

On top of the above figures, Nikkei Asia reported in September 2020 that Hong Kong’s leading investment fund, PAG, will invest about 840 billion yen in Japanese real estate over the next four years.

Implications for Japanese Residential Investment Market

Takeaways

• The premium condominium market temporarily fell in April 2020
• Recovery began in May and further improved from June 2020
• Work-from-home policies, the continued low housing mortgage interest rates, and the large transactions contributed to a steady rise in prices

2020 was a special and tough year for all of us, a once-in-a-lifetime experience that reversed our traditional work attitudes and styles.

In the premium condominium market, average contract prices and the number of potential purchasers both temporarily fell as Japan declared its first state of emergency in April 2020.

Surprisingly, Japan’s work-from-home policy and the continued low housing mortgage interest rates saw the residential market rebound and grow faster than expected. The recovery began in May, and June saw a substantial increase in the number of contracts, which, together with large investment companies committing to the multi-family residential market, led to a continued steady rise in residential prices.

2021 looking positive

With this background, the outlook for Japan’s residential investment market remains optimistic for 2021.

Recent news (January 14, 2021) confirms this — as institutional investor PGIM Real Estate announced the acquisition of a portfolio of 6 rental housing properties in Tokyo and Yokoyama, including one close to Shibuya station — with the following statement: “Demographic drivers, including population growth in Tokyo and Yokohama and the migration of young working adults to the major cities, are fueling demand for mid-market residential units for rent, which will support long-term growth across the portfolio.”

Sources:

• Nikkei Real Estate Market Information (Japanese)
• Nikkei Real Estate Market Information (Japanese)
• Nikkei Asia
• PGIM Real Estate