The economics of real estate dealing in Tokyo – a world view

In the two decades spanning 1980~2010, the Japanese economy went through a period of economic stagnation, and it became increasingly difficult to handle the aftermath of the 2008 financial crisis following the collapse of Lehman Brothers, and catastrophes like the “Great Eastern Japan Earthquake.” These events impacted Japanese financial markets adversely, but fortunately Tokyo spearheaded a major upswing in its real estate market, empowered by a strengthening middle class and rejuvenated manufacturing base. The immediate benefit is visible in the Tokyo real estate market where asset pricing is very competitively priced compared to other major Asian, European and American cities.

Tokyo becomes an investor friendly destination when global land prices are shooting upwards

The Japanese Association of Real Estate Appraisers (JAREA), the professional agency which appraise properties for the purposes of taxation, pricing and purchasing, has estimated that the pricing of apartment areas in Tokyo is considerably lower when compared to prices in other major cities in the world like San Francisco, Paris, London and Frankfurt. In fact, Tokyo apartment prices are presently one fifth of prevailing property prices in New York.

(Notes) This is an index when Tokyo is 100. The each data of cities are the point, not entire the city.

(Information) From “ JAREA's Survey result of world land prices of 2013 ”

The demographic decline of Japan is fueling investor sentiment in Tokyo

Japanese population statistics show a declining trend, and it is anticipated that the proportion of people of young working age will reduce by over 25 percent by 2050. While Japanese leadership, economists and sociologists debate the implications, it needs to be emphasized that we will be witnessing a heavier influx of population into Tokyo. Tokyo real estate stands to gain.

Impact of “Abenomics” and Japanese Prime Minister Shinzo Abe’s second term in office

(Note) From the Website of Ministry of Land, Infrastructure and Transport

Japanese PM Shinzo Abe is adopting the three point agenda of accelerating fiscal flexibility, gradual monetary easing and industry specific structural reforms as a strategy to revive an economy that was seriously compromised by over two decades of stagnation.
The Bank of Japan has facilitated the purchase of investment equities issued by J-REITs (Real Estate Investment Trusts) to the extent of 90 Billion Yen, as also index-linked exchange-traded funds (ETFs). The current purchase balance of REITs is 300 Billion Yen. This is positively impacting real estate prices.
The “Land Value Look Report" of The Japanese Ministry of Land, Infrastructure, Transport and Tourism, has indicated that the value of “Intensively Used Land” in Tokyo steadily appreciated in the fourth quarter of 2015.

Source: Land Market Value Publication of the Japanese Ministry of Land, Infrastructure, Transport and Tourism

Japan Residential Property Price Index and Residential Transaction Volume : Ministry of Land, Infrastructure, Transport and Tourism

You can verify the housing price index or the number of business/land size in the following Website;

Japan Residential Property Price Index and Residential Transaction Volume : Ministry of Land, Infrastructure, Transport and Tourism

Real Estate Transportation-price Search

You can verify the sales price of real estate information in the following website;

Japan Residential Property Price Index and Residential Transaction Volume : Ministry of Land, Infrastructure, Transport and Tourism

The policy implementation of the Shinzo Abe Ministry has created an “Ultra Low Interest” situation which is impacting real estate pricing. Additionally, the gradual weakening of the Yen has paved the way for a flood of investments hailing from mainland China, Taiwan, Singapore and other Asian countries.

Impact of Tokyo Olympics on real estate markets

It is widely projected that the Tokyo Olympics will be a game changer, impacting real estate dealings in a big way, kick starting a 3 Trillion Yen ripple effect on the Japanese economy by 2020 and beyond. Tokyo private industries and associations estimate Tokyo to benefit by an increase of over 150 Trillion Yen. By virtue of economic impact alone, this will be far greater than past Olympics. The Tokyo Redevelopment Plan will stimulate massive government expenditure in games venues, and hotel infrastructure, besides boosting overseas investor funding for developing prime properties in preparation for the 2020 Olympics. The development will be largely focused on the centralized and busiest areas of Tokyo, and will empower local industry in its ambition to project Tokyo as the “Economic Powerhouse” driving the Asian growth story. It will attract investments targeting Tokyo’s Special Economic Zones. The decision of the Shinzo Abe Ministry to demarcate Tokyo as a Special Strategic Zone will go a long way in encouraging deregulation and reforms envisaged under "Abenomics." This will attract international investment and funding in infrastructure, thereby positively impacting Tokyo real estate.

(Note) Tokyo Metropolitan Government /Asia head quarter special economic zone website

Tokyo’s Special Economic Zones : Tokyo Metropolitan Government

Tokyo Redevelopment PlanTokyo Redevelopment Plan

There is huge scope for infrastructural development in Tokyo in conjunction with urban developmental planning by the government in the gradual build up to Tokyo Olympics, 2020 and beyond. It is widely anticipated that these developmental initiatives will give a strong impetus to Tokyo’s competitive power making it a more attractive destination for investments, besides earning it the enviable tag of the most comfortable, convenient and beautiful destination for property investors and developers.

The Tokyo developmental initiatives are already showing

Haneda Airport arrival and departure statistics show steady gains from 750,000 to 800,000.
·In Central Tokyo, the percentage of repaired streets and renovated areas has risen sharply from 64 percent to 80 percent.
·Significant improvement has been registered in railway network infrastructure and point to point services, access to airports, reduction of train delays, barrier free commuting, community planning and emergency assistance endeavors, and disaster management measures.
·The development measures are positively impacting Information and Communications Technology in Tokyo, creating ripples of expansion aimed at sustaining demand and growth in all stages leading up to the Tokyo Olympics.

(Note) From the Website of Ministry of Land, Infrastructure and Transport

Japan Revitalization Strategy : Prime Minster of Japan and His Cabinet (PDF)

Tokyo Redevelopment Map

City redevelopment efforts are progressing at a fast pace in Tokyo. The areas garnering special attention are (area names in Japanese to be mentioned here)

(Note) From Website of PRESTIGE Co., Ltd.

4 Urban development

(a) Otemachi, Marunouchi, Yurakucho area
(b)Nihonbashi, Yaesu, Ginza area
(c) Toranomon, Roppongi area
(d) Shinagawa, Tamachi area
(e) Shibuya area
(f) Shinjuku area
(g) Coastal area

Tourist inflows increase greatly in Japan

The impact of tourism on the nation’s GDP is significant, and accelerating tourist inflow, anticipated to touch 40 million tourists, is expected to support real estate prices in Tokyo in way that benefits serious investors. According to the Japan National Tourism Organization (JNTO), the number of tourists in Japan in 2015 recorded a rise of 47 percent, representing an addition of over 10 million tourist arrivals over the previous year. This is projected to increase substantially by 2020. Tourist traffic has increased significantly from China, Taiwan, Hong Kong, Korea, Singapore and Malaysia, following the relaxation of visa requirements for tourists, and exemptions from consumption tax. The spurt in economic growth in the Asia Pacific Region, a weaker Yen, and enhanced tourist footfalls in Haneda Airport have combined to create favorable conditions for visiting japan. The most significant gains are expected to be recorded by the real estate market in Tokyo.

Boosting the real estate market in Tokyo

Efforts are on by the Japanese Ministry of Land, Infrastructure, Transport and Tourism to accelerate used residential building evaluation, besides the preparation of a revamped residential buildings data base that is expected to be ready and in place for test runs by the year 2018.