A Peek Inside Japan’s Property Market

October 01, 2018 Japan

The Japanese Property Market’s Stability

Japan, the world’s third-largest economy, has been maintaining a stable demand for condominiums and office rentals.

The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) said that Japan’s Residential Property Index for April 2018 was up 2.3% from the previous year, whereas condominium rentals were up 4.4%. Furthermore, the Global Property Guide said that in Tokyo, condominium sales rose to 0.5% in 2017, while in Osaka, detached house sales increased to 0.6% to 0.8%.

The MLIT mentioned an increase in residential prices. Residential prices in Tokyo’s metropolitan area had an increase of 8.5%. On the other hand, its residential land gained 9.1% while detached houses increased to 14.3%.

The MLIT also said that as of April 2018, 15,820 condominiums have been sold across Japan. Comprising 85% of overall home sales, condominiums prices increased to 3.5% as compared last year. The demand for offices in Japan, especially in Osaka, is likewise high. It will see a continual growth, especially because of the lack of new developments accompanying its high demand, according to Jones Lang LaSalle.

Moderate Japan Property Prices and Rental Yields

Japan property rental yields are staying afloat. According to a 2017 report from Global Property Guide, Tokyo’s central business districts rental yields range from 3.4% to 5.4%. They also mentioned that smaller apartments have been receiving greater rental yields. However, it is because smaller units are costlier to maintain.

The growth of Japan property prices is expected to be high, especially in central Tokyo. Rental yields of suburban condominiums for sale are also projected to peak in 2018 due to the demand for properties nearby transportation hubs. However, condominiums continue to become smaller as the demand picks up. The average apartment size now is 43 square metres, a 17% decrease for the past decade.

Property Boom Due to Olympics

On top of that, Japan’s future hosting of the Olympics in 2020 has invited a surge of investors. An article by the Nikkei Asian Review said that many big companies have now been investing heavily in Japan, capitalising on Japan’s prestigious Olympic hosting.

According to the information given, investing in a property in Japan is both an advantage and a risk. Analysts warned of a “post-Olympic crash,” and advised buyers to be warry.

All troubles aside, Japan property market might see a bright future ahead. In a report, Jones Lang LaSalle said that due to stable rental levels, commercial real estate investment volumes in Japan will increase to 5 – 10% year on year with 4.3 – 4.5 trillion Yen in 2018.

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