It was estimated that growth prospects centering on investments targeting the real estate market could scale 15% in the coming year in view of the marked escalation in property deals, and sustained price compression, with more properties entering the fray in Tokyo.
Emerging From PricewaterhouseCooper Surveys and Its Landmark Asia Pacific Real Estate Report, the Following Trends Could Be Identified:

  • While transactions in mainland China are slowing down, investments in Japan are picking up as investors are fueling growth exceeding recorded levels.
  • Encouraged by declining property prices that are now highly competitive compared to US and
    European markets, the buying trend is picking up as investors see greater scope for profiting from
    Tokyo real estate.
  • Investors are seeing Tokyo rental accretion as a more attractive source for earning profits in 2016.
  • Japanese Real Estate is increasingly being viewed as 2016’s best real estate destination because
    cheaper debt is providing the financial impetus to leverage higher profits compared to China and

According to major Tokyo investors, there is a comfortable demand and supply status covering residential deals. Even as new construction is slowly catching up, people are increasingly moving, and occupancy rates are showing an upward curve, this being the right moment to start pushing rentals.

Residential Markets Are Proving to Be Stronger Than Office Markets
PwC and ULI predict that residential markets are stabilizing faster than office markets, even as new constructions grow slowly, with residential cap rates hovering around 4 percent. The rental growth is expected to touch 2 to 3 percent as wages grow steadily.

Institutional Funding Is Growing As the Available Asset Base Increases
The Japanese real estate market on the whole is comfortably placed with asset availability (residential and office space) positively impacting demand. The trend is unmistakable that Asian investments, Middle Eastern inflows and European institutional and private individual funding are gaining leverage even as resident Real Estate Investment Trusts (REITs) have decelerated purchasing.

Real Estate Growth Is Expected to Stabilize Through 2017
Investor confidence has never been stronger in the Japanese Real Estate. The decline in capital cost below 1 percent has spurred a wave of investments fueled by cheaper debt exceeding 90 percent over 2014 figures. Investors are beginning to leverage greater profits compared to previous years.

Tokyo Retains Stronger Investor Interest Compared to Other Cities
PwC estimates that Tokyo will continue to spur investor interest, and deals are likely to yield higher returns compared to cities in Europe and US. The trend is expected to be sustained all the way to 2017.

Increasing GPIF Allocation Anticipated in Real Estate
The Japanese Pension Investment Fund (GPIF) is widely anticipated to be favoring allocation exceeding US$ 16 billion, fueling a larger movement of global investments into Japanese real estate.

Savills Residential Survey Foresees Recovery in Rentals in Tokyo Luxury Residential Apartments
According to Savills Research & Consultancy, there has been a steady recovery in rentals pertaining to luxury residential apartments, and this is particularly noticeable in Tokyo. Despite rent being around 20 percent lower than 2007, there is considerable scope for rents increasing further.

Overall, back to back on positive economic indicators and a strong economic recovery, real estate investor profits will continue to remain high in Japan, a trend that is likely to augur well for both residential and office transactions well into 2017.