Why Japanese properties are more favourable to foreign buyers

Investors from US and Europe have a pricing advantage over domestic buyers.

Against the backdrop of an overall market recovery, Colliers says soaring commodity prices and fluctuating exchange rates are changing the market sentiment. 

Meanwhile, investments in major cities other than Tokyo such as Yokohama, Osaka, and Nagoya, are showing signs of recovery while cross-border investments remain strong.

Here’s more from Colliers:

There has been a flurry of activity among foreign investors, with M&G Investments committing JPY49.2 billion (USD378 million) to a 30-property residential portfolio in March 2022. In addition, Morgan Stanley and Lendlease invested significantly in new properties in Yokohama, while Gaw Capital acquired a residential portfolio spanning Tokyo and other major cities. 

Hines, meanwhile, has revealed plans to develop a large logistics facility in Aichi Prefecture. At the same time, there continued to be net sales of J-REITs, resulting in higher-grade properties being added to the market. For instance, Japan Real Estate Investment sold Harumi Center Building for JPY24.3 billion (USD187 million). And investment volumes appear to be on a gradual upward trend in major cities outside Tokyo.

Forecast

Supported by a weak yen and widening interest rate differentials, properties in Japan are becoming increasingly favourable to overseas buyers. Foreign investors, largely hailing from Europe and the US as well as Asia, have a pricing advantage over domestic investors, and so we expect investments to increase. 

The relaxation of travel restrictions in the first half of 2022 has also made it easier for senior executives from foreign investment firms to visit Japan. This could facilitate swift decision-making and likely further accelerate cross-border investments.