As a result of the political and economic reforms as well as the push for urban renewal plans, property prices of Japan began to rise from 2006. Prices then took a hit with the U.S. Subprime Mortgage Crisis affecting the world’s economy. The aftermath of 2011’s Great East Japan Earthquake also caused property prices to come to a standstill.
In 2012, Japanese Prime Minister Shinzo Abe won his second term and pushed for a set of aggressive monetary policies, commonly known as Abenomics, that aims to pull Japan out of its deflationary slump. These policies have had a positive impact on the real estate market.
Fuelled by the economic growth in Japan and increase in the confidence level of foreign buyers, real estate market in Japan has since been on an uptrend.
Other factors behind the surge in demand for Japan’s properties include:
Support
One of the key drivers pushing up the property outlook in Japan is the 2020 Summer Olympic Games in Tokyo. With expectations that property values will appreciate in the run-up to the Olympics, there has been a steady increase in foreigners investing in Japan.
The other much anticipated development is the high-speed Linear Chuo Shinkansen. The Japanese maglev (magnetic levitation) is expected to start operations in 2027 and will connect Shinagawa Station in Tokyo to Nagoya Station in Nagoya, with plans to extend to Osaka. There are a number of redevelopment plans near both terminal stations, pushing up land prices in the surrounding area.
There may also be a rush to buy ahead of the planned consumption tax hike from the current 8% to 10% in 2019.
Stability
According to Mastercard’s 2017 Global Destination Cities Index, Tokyo is one of the ten most popular cities for international travellers.
With a population of close to 38 million, Tokyo is the biggest metropolitan city in the world. It is also one of the wealthiest cities in the world with USD1.52bn in Gross Domestic Product or GDP.
Demand for properties in Japan has been on a steady uptrend, considering the country’s stable economic and political climate. In 2016, Japan became the second biggest real estate market with a capital value growth of 2.7%, overtaking the United Kingdom.
With 51 Global Fortune 500 companies having set up headquarters in the country, Japan is now the third highest country housing such companies. Tokyo, being an international business hub, is home to most of them, and has over 2,300 foreign-affiliated companies within the city.
As a country with a mature legal system, sales and purchases of real estate and related matters are strictly protected by the laws, further mitigating the risk of investing in Japan.
Standards
Japan is very strict with its building codes and high-rise buildings have to meet a set of strict building regulations.
All buildings in Japan are required to have an earthquake-resistant structure, which means that new developments can only be approved upon compliance with the rigorous standards set by law.
The government is also working on regulations to help deal with the stresses that tsunamis can put on structures, in addition to the current tsunami evacuation and shelter requirements and improved hazard maps.
Japan continues to appeal with its rich history, fascinating culture, high quality of life and immaculate city scape. There are other many other reasons for people who wish to live in Japan or simply to add on to their investment portfolio of real estate with purchases in Japan, especially since there are no restrictions on foreigners buying real estate there.
Compared to other developed countries and cities around the world, properties in Japan are still relatively affordable. There is likely still room for Japan’s property market to rise, making it a good investment opportunity to consider.
Whether it is to take advantage of the value of yen in the world’s currency markets or to ride on the low inflation rate, it is timely to start tapping on the growing real estate market in Japan.