Japan has long been known for its attractions: Tokyo for business and shopping, Osaka for the food, Karuizawa for the alpine forests, Kyoto for the history, and Niseko for the best powder ski slopes in the world. However, in recent years, there has been a significant shift in perception. For visitors from Singapore, Hong Kong, and mainland China, Japan has become a place to buy.
The weak yen and low borrowing costs have certainly contributed to this trend, but the real driving force behind the demand is much stronger. People are now looking to invest in swish apartments in Tokyo, properties near future casinos in Osaka, mountain lairs in Karuizawa, renovated wooden mansions in Kyoto, and prestigious ski lodges in Niseko. This change has been extraordinary, with real estate brokers reporting a five- to ten-fold increase in inquiries from individual foreign buyers between January and September.
Not only are individual buyers interested, but institutional investors, sovereign wealth funds, private equity firms, and corporations are also eager to make their mark in Japan’s real estate market. It has become one of the hottest and most liquid markets in the world.
What’s attracting these heavyweight buyers to Japan is not just the appeal of a desirable tourist destination, but rather the predictability it offers in an unpredictable world. Despite the shift to remote work during the pandemic, Japanese white-collar workers have returned to their offices. However, companies are selling their land banks and other real estate assets under pressure from shareholders. On the other hand, China has lost its attraction as an investment destination both economically and geopolitically.
In addition to stability, Japan is now experiencing an extended period of political stability, with Prime Ministers Shinzo Abe and Fumio Kishida holding their positions for a combined 10 years. This political stability, combined with a stable financing environment, makes Japan highly attractive to investors.
The official figures support the hype. In the first half of 2023, international investment in real estate in Japan reached ¥513 billion, up from ¥362.1 billion in the same period last year. Tokyo has also become one of the world’s most investable cities, with $9.3 billion invested in its real estate, just behind Los Angeles. Osaka ranked 29th with $1.9 billion invested.
Singaporeans have been the most active cross-border investors in Japanese real estate, taking advantage of the depreciation of the yen. However, the shift in tactics is also notable, as funds now focus on growth sectors such as logistics and the hospitality industry.
Liquidity in the Japanese market has created opportunities at the upper end. For example, Singaporean sovereign wealth fund GIC is considering selling its 46-storey Shiodome City Center skyscraper in Tokyo for a price close to $2 billion, courting both Japanese and international investors.
Eiki Shibao, founder of Tokyo-based NorthEast Capital Management, believes now is the time to invest in Japan. However, he cautions that doing business in Japan can still be complicated.
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