There are many examples of resilience and outperformance in the global property industry. In residential markets, house prices in the United States hit a record high last month amid a rise in mortgage rates to their highest level since 2000. In commercial markets, industrial and logistics assets accounted for 37 per cent of global cross-border investment in the first half of this year, the highest half-year share on record, according to CBRE.

Yet, the ones that stand out are those that have stood the test of time or involve markets that are defying major trends in the global economy. Three of the biggest trend-defiers are in Asia, one of the reasons parts of the region’s real estate industry – particularly the office sector – have fared better than in the US and Europe.

The first trend-defier is Singapore’s remarkably resilient housing market. Although cross-country comparisons should be treated with caution, given that 80 per cent of Singaporeans live in public housing – 90 per cent of whom own their apartments – the city state has bucked the downturn in residential real estate in spectacular fashion. Last year, private property prices rose 8.6 per cent, compared with 10.6 per cent in 2021.

According to Knight Frank’s Global Residential Cities Index, home values in Singapore grew 7.5 per cent on an annualised basis in the second quarter of this year, the second-fastest rate among global gateway cities after Dubai. Singapore’s performance is all the more striking given that one-third of the 100 cities tracked by Knight Frank were still experiencing price declines.

While a number of factors are at work – the city state’s safe-haven appeal, pandemic-induced delays in construction and strong demand from Singaporeans – the one that is the most compelling is often viewed as the biggest threat to prices.

Successive rounds of cooling measures implemented over a 14-year period prevented excessive speculation, ensuring that the growth in prices never got out of hand. While increasingly draconian, the restrictions have targeted second-home buyers and foreigners alike. “If it wasn’t for the cooling measures, prices would have been far more volatile, causing a boom-and-bust cycle,” said Nicholas Mak, chief research officer at property portal MOGUL.sg.

A man waves from a bridge in front of the skyline of the Yeouido business district in Seoul, South Korea, in April 2020. The fundamentals of the capital’s grade A office market are the envy of landlords in the West. Photo: AFP

The second trend-defier is Seoul’s exceptionally strong office market. At a time when offices have been hit hard by the Covid-19-induced shift to hybrid working and the dramatic rise in interest rates, South Korea has emerged as the poster child for the traditional workplace.

A survey conducted by Nicholas Bloom of Stanford University earlier this year revealed that South Koreans worked from home an average of just 0.4 days a week, the lowest among 35 economies surveyed. Even in office-oriented Asia, the office occupancy rate in Seoul is the highest along with Beijing and Shanghai, having reached “normal” levels (90 per cent or more) in mid-2022, data from JLL shows.

The fundamentals of Seoul’s grade A office market are the envy of landlords in the West. The vacancy rate stood at a negligible 1.1 per cent in the second quarter of this year due to persistent undersupply, net take-up has remained in positive territory for the past three years while rents continue to rise at a brisk pace. “There is no Covid discount,” said Rob Wilkinson, deputy managing director at CBRE in Seoul. “Quite the opposite. Landlords are increasing rents.”

Investment in Seoul’s office market has soared. According to data from MSCI, transaction volumes reached US$3.4 billion in the second quarter, 15 per cent higher than the average for a second quarter during 2015-19. The sharp fall in office deals in the US, Europe and the rest of Asia in the second quarter meant that South Korea was the world’s second most actively traded office market.

The third trend-defier is Japan, and in particular what sets its economy apart from the rest of the world. For starters, Japan is not China, which matters significantly to global investors seeking a large and liquid market in Asia without the economic and geopolitical risks that China presents.

Second, Japan is the odd man out in global monetary policy. Despite a long-awaited rise in inflation and the dramatic increase in borrowing costs in almost all other major economies, the Bank of Japan (BOJ) has kept its ultra-loose policy firmly in place.

Super-low interest rates and higher loan-to-value ratios compensate for lower rental yields on commercial properties, allowing investors to generate positive cash-on-cash returns. Furthermore, Japan is stable and predictable, a rarity today. “It’s the place to ride out the storm [and] the only real investible market in Asia with depth and liquidity,” said John Howald, head of international capital, Asia-Pacific, at Colliers.

Efforts to reshape global supply chains away from China are benefiting Japan. In August, ESR, Asia’s largest real asset manager, began construction on what is expected to be the largest logistics park in Japan, partly to capitalise on “an increase in manufacturing activities spurred by reshoring from Asia back to Japan”.

To be sure, an abrupt tightening in policy by the BOJ – or sharper falls in property values in the US and Europe that make Japanese assets look expensive – could undermine sentiment. Singapore’s housing market, meanwhile, is slowing significantly while competition for prime office space in Seoul is fierce.

Yet, these are risks that either may not materialise or are relatively inconsequential given the much bigger threats faced by the property industry. Asia’s sources of resilience are likely to remain resilient for some time yet.

Source : SCMP

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TOKYO, Oct 4 (Reuters) – Mie Kawamata dreamed of owning a home where she could tend a small garden and her 1-year-old daughter could play outside, yet still be close enough to commute to central Tokyo.

But after much searching, Kawamata and her husband, who both work in accounting, gave up on the house idea and bought an apartment about a third of the size that she’d wanted.

“I’m not sure ordinary people can buy a house anymore,” Kawamata, 31, said. “Housing prices and rents have risen a lot compared to the past, but in the end, salaries haven’t gone up that much.”

After weathering decades of deflation and stagnant growth, Japan is seeing an investment boom that has made apartments in central Tokyo unaffordable for young Japanese professionals.

The flood of investment drove the average price for a new condominium in central Tokyo up 60% to a record 129.6 million yen ($865,000) in the first half of this year, according to the Real Estate Economic Institute.

For locals, the surge in prices has made Tokyo the second most unaffordable city worldwide, only behind Hong Kong, according to a UBS global real estate report.

A 60 sq m (646 sq ft) apartment in Tokyo now costs 15 times a skilled worker’s salary, up from 10 times a decade ago and well above London, Singapore and New York, the UBS report showed.

While partly due to low interest rates, the price surge is being driven by foreign buyers taking advantage of the weak yen, now near a 33-year low, and those looking to shift funds out of China, where a real estate crisis and geopolitical concerns are putting a chill on investment, according to property experts.

Foreigners have piled more than 1.8 trillion yen into Japanese real estate since 2019, outstripping flows from institutional investors, property funds, and corporations, according to consultancy Cushman & Wakefield.

And there’s more to come. Funds from property speculators have piled up over the pandemic, and Japan looks to be a prime destination in Asia for it to land, said Cushman & Wakefield director Mari Kumagai.

“If they want to keep the money in Asia Pacific, it tends to be either Australia or Singapore or Japan,” Kumagai said, adding that Japan was the most attractive of the three, based on value stability and size of the economy.

Average condo prices in central Tokyo were bumped up in the past year by a large supply of high-end residences hitting the market. Emblematic of that is the new Azabudai Hills complex, featuring the country’s largest office tower and about 1,400 residential units.

The Azabudai project, which looms over the iconic Tokyo Tower, is catching the attention of investors in Taiwan, said Wang Mao San, president of Shingi-fusaya Realty Inc.

Super wealthy Taiwanese are snapping up Tokyo properties worth more than 100 million yen for second homes, he said, while regular rich investors focus on condos in the 30-70 million yen range in Tokyo and the western metropolis of Osaka.

“In Japan, the political and economical situation is stable,” Wang said about the attractiveness of the market. “Tokyo is still not that expensive compared to other big cities like Hong Kong and London.”

A luxury condo in Tokyo’s high-end Motoazabu area is priced at less than half that of Hong Kong and 45% cheaper than London, according to the Japan Real Estate Institute data.

That’s cold comfort for Mari Mochizuki, a single mother and salesperson for a music company who’s been hunting in vain for an apartment big enough for her piano and perhaps the addition of a cat.

The 39-year-old is eager to find a place that will hold its resale value in case she has to move for work. But the options she’s seen in the city centre are either too pricey or worn out, pushing her search area to the northern edges of the capital.

“It seems like prices for every apartment of decent size are blindly going up, even those out of the way areas or with surprisingly cheap interiors,” she said. ​

Source : Reuters

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Foreign investor volume saw 100% increase in Q1 2023 on a year-on-year basis.

– Koji Nato

LL’S RESEARCH DIRECTOR OF CAPITAL MARKETS IN JAPAN

Hotels or offices?

Who are investing?

A view of the historic Shinchaya Inn on the Nakasendo Way on November 7, 2022 in the post towns of Magome, Japan.

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Spread across 9,300 square metres (100,104 square feet) and 290 units in Tokyo and Kyoto, the assets will be managed under the sustainability-focused Cavana brand and target urban dwellers in key Japanese cities, Hines said in a release.

The acquisition is the second multi-family transaction for the Hines Asia Property Partners core-plus fund, following the purchase of 11 multi-family assets in Japan late last year. Chiang Ling Ng, chief investment officer for Asia at Hines, described the country’s multi-family segment as a resilient non-discretionary sector and a stabiliser for a blended core-plus strategy.

“It is anticipated to be defensive in an inflationary cycle and with positive leveraged yields, these new acquisitions should continue to add to our growing footprint in the region, allowing us to deliver a high-quality portfolio to our investors,” Ng said.

Living Aggregation Strategy

No details were disclosed about the seller or the deal value, but Houston-based Hines said the latest acquisitions are part of HAPP’s living aggregation strategy for Japan, which aims to scale up to $1 billion in asset value in three to five years.

The 11 properties acquired last year span over 14,000 square metres across more than 400 units in Tokyo, Nagoya and Fukuoka. Under the Cavana banner, the projects intend to focus on sustainability initiatives that encourage tenants to conserve water, recycle materials and reduce their carbon footprint.

“The Japan multi-family market remains an attractive investment strategy due to its resiliency of income, stable yield, large number of available investable assets and attractive risk-adjusted returns,” said Jon Tanaka, country head of Japan at Hines.

Family-run Hines was founded in 1957 and now operates in 30 countries, managing nearly $96 billion in assets globally.

First-Timers Rush In

The month of April saw more players crowd into Japan’s multi-family arena, with SilkRoad Property Partners announcing the acquisition of five multi-family assets in Greater Tokyo as part of $150 million in deals that also bagged a central Tokyo office building. The transactions marked the Singapore-based firm’s first investments in Japan.

Also last month, Singapore’s CapitaLand Investment agreed to buy six rental housing assets in Osaka for $105.9 million, representing the first multi-family acquisitions for the firm’s flagship regional core-plus fund.

One of the busiest global investors in Japan real estate, US-based KKR, struck a deal in April to acquire an under-construction apartment building in the capital city’s Taito ward for $33 million on behalf of the buyout giant’s Tokyo-listed REIT.

Source: MINGTIANDI

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Japan has a glut of older, abandoned homes in rural areas, as Insider has previously reported. With the country’s population in decline, there simply aren’t enough people willing to purchase these houses.

The country has at least 8.5 million such “akiya,” the Japanese word for unoccupied home, according to government data from 2018. Some experts believe there are as many as 11 million empty houses. When owners of these traditional homes die, those who inherit the properties often don’t want them or are unable to maintain them. In Japan, land remains valuable, while houses lose value over time and are often torn down and rebuilt.

Government officials are concerned that growing numbers of akiyas are hurting their efforts to revitalize rural parts of the country. So they’re subsidizing renovations and selling homes often for around $25,000, and sometimes for as little as $500.

Americans are getting in on the deal. They’re increasingly buying up these houses and restoring them, the New York Times reported.

Matthew Ketchum, a Pittsburgh native who lives in Tokyo, is taking advantage of the akiya market in a different way. In 2020, he co-founded a real estate consultancy, called Akiya & Inaka, that markets and sells akiya and other traditional homes, the Times reported. Ketchum said he’s seen a strong growth in interest from American buyers.

“At first, we were getting most of our inquiries from Japan residents, Australians and Singaporeans,” Ketchum told the Times. “That has changed now, with the vast majority of our international clients being based in the U.S.”

Jaya and Chihiro Thursfield, whose experience Insider reported on in 2021, moved to Japan from London in 2017 and bought an abandoned akiya less than an hour outside Tokyo for $30,000, or three million Japanese yen, in 2019. They spent about $150,000 and two years renovating the home, where they’ve lived with their twin sons and cats since December 2020.

The Thursfields, who were also profiled by the Times, have documented their renovations on Youtube, where viewers can see how they transformed a home largely in disrepair into a beautiful, minimalist property.

“This was truly an abandoned house in terms of the declined inheritance and everything left behind by the previous owners,” Jaya, who’s Australian, told Insider.

Source: Business Insider

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Japan’s government is planning to make it easier for property owners to rent out their rooms to tourists and other short-term guests.

The move is in preparation of an expected influx of foreign tourists, now that COVID-related border measures have been eased.

The type of lodging is called “minpaku” in Japanese. Currently, owners are legally allowed to rent out their homes to tourists. But they are required to employ property-management firms if they are absent from the sites to handle complaints and for cleaning.

Only people with a certain type of real-estate license or at least two years’ experience in property transactions are eligible to run a minpaku business.

The tourism ministry plans to scrap that requirement by the end of March 2024.

It will replace it with less demanding measures now under consideration. One proposal is to require that the owners take a 20-hour long course, seven hours of seminar participation and finally an exam.

About 2,500 firms and individuals are already registered as minpaku operators. Most of them are in big cities.

One aim of the reformed regulation is to encourage more people to set up lodging in rural regions, boosting local economies.

Source: NHK

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