Real Estate Investment Market In Japan

Facts about Japan

  • Japan is considered as an island nation whose location is in East Asia which is surrounded by Sea of Japan from the east and Pacific Ocean to the west.
  • Japan is country having area of 3,77,873 km2.
  • Honshu, Hokkaido, Shikoku and Kyunshu are considered as the main island in the country which covers over 80% of land area in Japan with Honshu is the largest area of 2,31,000 km2.
  • Tokyo is the largest city in the country with a highly densely population leaving. Tokyo is considered as the commercial capital of the country.
  • Japan has 6800 islands.
  • Japanese cities is the densely populated as 70% of the country is mountainous terrain.
  • Japan faces almost 1500 earthquakes in a year. Tsunamis and volcanic eruptions are common in the country.
  • It is the third largest economy by GDP in the world.
  • It is the 10th most populous country in the world.
  • Tsukiji market in Tokyo is considered to be the world’s largest fish market.
  • Japan is the second country in the world which has the lowest homicide rate which is about 0.5%.
  • English is the compulsory language in schools.
  • The most punctual mode of transport are the trains, their average delay time is 18 seconds.
  • There is a highway which passes through a building.

Population

The population of the country is 126 million which the 10th largest in the world. The median age of the people in the country is 45. The country enjoy the highest literacy rate which is almost 99%. There are about 98.5 % ethnic Japanese living in the country and the remaining population includes Koreans, Chinese and Filipinos. The average age of the population is 84 which is 4 years higher than USA. The cities of Japan are considered to be highly densely populated cities in the world. The birth rates is declining over the years. The ageing population increasing at faster rate. Japan has less than 3 working people for every retiree in the country.

Climate

The climate of the country depends on the regional location.  Summers are hot and humid followed by rainy season which lasts over a month. Snowfalls occurs in the northern region of Japan whereas other parts of the country has mild winter season. Autumn and spring are considered to be most favourable season in the country which accounts to be almost 6 months.

Infrastructure

The infrastructure is considered to be one of the advanced in the world. Modern and extensive roadways and railways are connecting every corner of the country for transport. Railways are the major mode of transport of the commuters. Bullet trains run across the length and breadth of the country connecting different regions. There are many cities which has mono rail for connecting within the city. Major road transport is used basically to travel within the metropolitan city. Expressways are build connecting harbours and airports in the country. Air travel is considered as the fastest mode of transport. Its airports are one of the busiest in Asia. In order to connect to the smaller islands small boats are used for transport. There are few intercity boats that connecting the cities of Japan. Telecommunication is also advanced in the country. Japan’s construction technology is one of the unique technology suited for absorbing the earthquakes in the country.  There are 12 cultural and 4 natural sites which are considered as World Heritage Sites.

Asset bubble burst

Japan suffered a huge bubble burst of the real estate that shook the economy. The debt of the local bank increased over 300%. The prices of the asset got inflated by over 13000% across the country which continued up to 1990. In 1991, the banks suffered by the bubble burst which left a debt of over 1 trillion USD. The prices of the asset in the cities steeply increased due to which the people moved towards the towns for accommodation. The speculation of the property tax has led to the speculation for hyperinflation of the land prices. The crisis of the asset price in the commercial cities like Tokyo.

Global crisis in 2008

Japan had again hit by the global financial crises which affected the asset sector. The major reason for the decline of the exports followed by the appreciation of Yen which impacted the economy. Due to the slowdown the demand for the asset declined in the country as the liquidity reduced followed by the outflow of funds from the foreign investors. The prices of the houses fell by 4% and 6% in the major cities in the country. Commercial, residential and industrial land prices again declined because of the slowdown. Stagflation, low demand from the consumers and shortage of global liquidity have led to the decline of the asset prices.

Monetary policies in the country

The interest rates in the country is kept low for making the opportunities to the investors to invest in the country. Japan’s 3 major banks has cut the mortgage rates for further liquidity in the market for investment. The debt of the banks in the country is very high due to which the interest rates are kept low for investment and liquidity in the economy.

Business in Japan

Japan exports mainly to USA and China. The government is making continuous efforts for increase in the trade and investment with different countries of the world.  Japan has always been considered as the manufacturing maestro, but the country is focusing on service sector for growth opportunity. Healthcare, retail, advanced manufacturing and financial services are one of the main domain of business in the country. The corporate offices are usually situated in the major cities, however Tokyo is considered more preferred for head office.

Current situation of real estate market in Japan

  • The house prices has continued to increase from 2014 which is one of the highest in the decade for the country.
  • Resorts and tourists development are being taken by the private and public sector.
  • The government has allocated financial support for the development of the real estate segment by multiple stimulus package.
  • The real estate value of Japan is the cheapest compared to the major cities in Asia.
  • Tokyo is the topmost city in the country which has the highest increase in residential construction.
  • Depreciation of Yen has made the real estate sector more attractive for foreign investors.
  • The rise in the investment has led to the increase in the renting office space in the major cities.
  • Rental of household and office space is increasing showcasing the demand of the property in the country.
  • The government is providing tax incentive to the companies who are relocating their offices from Tokyo to another regions.

Factors supporting the investment in asset

  • Economic recovery from the stagnation which the country suffered over last 2 decades.
  • Consumer demand is increasing with decline in the asset prices.
  • Foreign investors are finding attractive to buy asset in Japan.
  • The government is making an effort to increase the wages of the working class which would further infuse money in the economy.
  • Increase in the consumer confidence for investment.
  • The central bank is stabilising the long term interest for purchase of property to motivate investors in the long term.
  • Lending criteria and underwriting are reworked for further improvement in the investment.
  • The central government is keeping the interest in control for further investment in the asset class.
  • Asset development programme is run by the government to develop the semi urban region supported by infrastructure development connecting the region.
  • Easy and fast mode of transport for connectivity.
  • The government is thinking for immigration of foreigners in the country which would further add demand to the real estate sector.
  • Increase in the employment has led to the increase in the demand for houses in the different regions.
  • Depreciation in Yen has also given boost for the tourism sector. There are more tourist arriving in the country for vacation.
  • Japan is going to conduct Olympics in 2020 which is going to be one of the major event in the country which will give a major boost to the economy as well as real estate sector because of the development projects supporting the event.
  • Japan ranks first in the Global Peace index in Asia supported by social stability making people live safely with harmony in the country.
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