Investing in Japanese Real Estate

Is now a good time to invest in Japanese real estate?

In a recent survey by Nomura Real Estate Urban Net, members of Nomura’s professional real estate investment website Nomucom Pro, were asked for their insight on whether now is a good time to invest in Japanese property and what they think the outlook is for the next year.

1. Is now a good time to invest?

The survey found that the majority (58.8%) of respondents answered either “Now is the time to buy” or “It will soon be the time to buy”. This is a slight increase from last year’s survey (conducted in May 2017), when 57.8% of respondents indicated that it was either the time or would soon be the time to buy.

The tenth annual survey was conducted from May 22nd to 31st, 2018, and surveyed professional real estate investors who are members of Nomucom Pro, which has over 19,000 members. Four hundred and thirty (430) valid responses were received (350 from investors who currently own real estate and 80 who do not).

Why or why not?

Respondents were also asked to explain their response.

Now is a good time to buy (22.1% of respondents)

Of people who answered “I think now is the time to buy,” many indicated that they “expect prices to increase due to the Olympic effect” (Tokyo will be hosting the 2020 summer Olympic games) and “properties with good yield are starting to come online”.

It will soon be the time to buy (36.7% of respondents)

Of people who answered “I think it will soon be a good time to buy”, many indicated that “it has been difficult to get financing and they expect prices to fall”. A common answer in this category was also that “property prices have peaked, so prices will likely fall”.

It will be a while before it’s the time to buy (52.2% of respondents)

Of people who answered “I think it will be a while before it’s the time to buy”, many indicated that they “expect construction and labor costs to increase until the Olympics” and “even if building prices drop, it will be difficult to get financing”.

2. Where are real estate prices headed in the next year?

People were also asked to forecast where property prices are headed in the next year. The key takeaway is that the percentage of people who answered that “prices will decrease” increased to 32.8% of respondents (compared to 26.6% in the May 2017 survey).

I think prices will increase in the next year (18.4% of respondents)

Of people who answered “I think prices will increase in the next year”, the reason most often given was “The Olympic effect will cause prices to go up”.

I think prices will decrease in the next year (32.8% of respondents)

Of people who answered “I think prices will decrease in the next year” the reason most often give was “It’s becoming difficult to get bank financing”.

I think prices will stay flat (48.8% of respondents)

Of people who answered “I think prices will stay flat in the next year” there were two reasons most often cited: “Prices have already risen but there is nothing to pull prices down in the city center” and “Prices will likely not decrease until the Olympics”.

3. Do you think it was good that you invested in real estate?

Investors currently holding real estate were also asked whether they think that it was good that they had invested in Japanese property. The overwhelming majority (85.7%) answered that “it was good to have invested in real estate”. Thirteen point one (13.1%) of respondents answered that  they were “not sure one way or the other” and 1.1% answered that “it was not good to have invested in real estate”.

4. Have conditions for getting property financing changed?

Investors were also asked whether they thought that the conditions for getting bank financing for investment have changed. A slight majority (52.8%) of respondents answered “Yes, I feel that (conditions for getting financing) have changed”, while 47.2% answered “No, I feel that conditions have not changed”.

Of those who replied that they felt that conditions have changed, 87.7% of respondents answered that they feel that “underwriting has become stricter” (in last year’s survey only 65.9% of respondents indicated this). In this year’s survey only 7.9% of respondents said that “underwriting has become looser” (compared with 28.3% in last year’s survey).

Source: Nomura Real Estate Urban Net

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