_Japan Capital Markets Update 2017
Despite declining by about 40% last year, Tokyo remained as the most active Asia-Pacific investment metro market in terms of sales volumes of investment grade stock. However, when looking at the country as a whole, the Land of the Rising Sun was dethroned by its Chinese neighbor, retreating to number two position in terms of sales volumes in 2016.
In Q1 2017, the downward trend continued as the Japanese investment market (office, industrial, retail, hotel and apartment) shrank by 19.3%. The recorded investment sales of US$6.6 billion was the lowest Q1 figure since 2009, in which US$6.5 billion was recorded during the onset of the Global Financial Crisis.
Source: Knight Frank Research, Real Capital Analytics
One of the biggest reasons for the decline in sales volume can be attributed to the absence of capital inflows from the United States and China – the top two investors in 2016. The recent capital controls imposed by the Chinese authority has already curbed some of the originally planned big-ticket transactions and development activities in the region. Additionally, due to the limited availability of stock, many overseas investors are waiting on the sidelines for now.
Nonetheless, in March 2017, Mitsubishi Heavy Industries Yokohama Building was sold for US$528 million to a domestic property firm Hulic Co. Ltd. The price tag was one of the most expensive in recent years, suggesting that investors are still on the hunt for quality buildings.
Kenji Nagamine, Senior Manager at Knight Frank Japan Desk comments:
“As geopolitical and economic risk unfolds globally, it is likely that international investors will look for safe and mature markets because they are lenders to the world. We are optimistic that savvy investors will recognise Japan as a safe haven for their money”.
The latest Abenomics stimulus package announced in late 2016 – aimed at boosting infrastructure development and helping small- and medium-sized companies expand – could prove beneficial to the market and may very well help lift the real estate market in the mid to long term.
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