_Japan Capital Market Update 2017

by Pow Ying Khuan, APAC Research Analyst

Despite declining by about 40% last year, Tokyo remained as the most active Asia-Pacific investment market in terms of sales volume. However, for the whole of Japan, the Land of the Rising Sun was dethroned by its Chinese neighbour and retreated to number two in terms of sales volume in 2016.

In Q1 2017, the downward trend continued as the Japanese investment market (office, industrial, retail, hotel and apartment) shrank by 19.3%. The recorded investment sales of US$6.6 billion was the lowest Q1 figure since 2009, in which US$6.5 billion was recorded during the onset of the Global Financial Crisis.

^{Source: Knight Frank Research, Real Capital Analytics}

One of the biggest reasons for the decline in sales volume can be attributed to the absence of capital inflows from the United States and China – the top two investors in 2016. The recent capital controls imposed by the Chinese authority has already curbed some of the originally planned big-ticket transactions and development activities in the region. Additionally, due to the limited stock for sale in the investment market, many overseas investors are left on the bench for now. 

Nonetheless, in March 2017, Mitsubishi Heavy Industries Yokohama Building was sold for US$528 million to a domestic property firm - Hulic Co. Ltd. The price tag was one of the most expensive in recent years, suggesting that investors are still on the hunt for quality buildings.

Kenji Nagamine, Knight Frank Japan Desk Senior Manager comments:

“As geopolitical and economic risk unfolds internationally, it is likely that international investors will look for safe and mature markets because they are lenders to the world. We are optimistic that savvy investors will recognise Japan as a safe haven for their money”.

The latest Abenomics stimulus package announced in late 2016 aimed to boost infrastructure development and help small- and medium-sized companies expand. In turn, this spending may very well lift the real estate market in the mid to long term.

Click here if you wish to contact Knight Frank Japan Desk directly to discuss Japanese property.