Investing in Japan
The Japanese property market is one of the biggest in the world, both in commercial and residential sectors, and sits at the centre of one of the world’s biggest economies. Yet despite this, it remains relatively underserved by international investors.
We believe, with the strong fundamentals in place within Japan, together with a fast-growing Asia, the Japanese market has the ability to match, or exceed other international real estate markets for owners and investors. On top of its powerful economic incentives, it offers some key attractions over rival markets.
Japan remains the third-largest economy in the world, with many of its regions having larger economies than developed countries around the world. Tokyo is the world`s largest city when measured in terms of economic might and is set to grow into the future. Despite the declining population being felt in some sectors, the underlying tax base continues to increase.
A large number of major corporations are based in Tokyo and the city continues to attract the best of Japanese and foreign businesses due to a strong rule of law, new tax environment and pleasant working standards.
Japan also has the world’s second-largest commercial real estate sector. Yet despite these factors, cross-border real estate trade remains small, just 12% of all transactions. This compares with 68% in regards to market leader, London.
Unlike these other major commercial real estate markets, Tokyo offers much greater value.
Right now, Japan tourism sector is booming, with visitor numbers rapidly growing over the previous three years and the government now targeting 30 million annual inbound tourists per annum by 2020. The country has a number of powerful attractions, including an attractive and rich culture, high quality of life, clean cityscape and a strong service ethic. It is luring the growing wealthy from across Asia as well as strong numbers from Europe and America.
In addition to the huge influx of tourists, there are other changes that will significantly affect the makeup of the Tokyo economy (and with it, the larger Japanese economy). One of the biggest of these is the opening of special economic zones – specific areas of Tokyo that will offer tax breaks, low-interest loans, easier immigration requirements and living and business support – all policies designed to lure more international companies. There remains the possibility that gambling laws will also be relaxed to allow for the construction of mega-casinos in certain areas of the country as well.
For real estate investors, some final points to consider:
- Unlike elsewhere in Asia there are no restrictions on tenure, Japan is a freehold market and foreign buyers enjoy the exact same privileges as domestic buyers.
- Occupancy rates are high, and both foreign and domestic immigration in Tokyo is expected to continue through to at least 2035.
- The market is stable and provides good cash-flow opportunities, especially when considered alongside low-interest rates.
To talk with one of our property experts about the Tokyo market, please contact us.