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THINK Japan: Too soon to sound the alarm

Tokyo skyline

Is it too late to jump on the Tokyo real estate market bandwagon? In our latest research report, Harry Tan (Head of Research, Asia-Pacific) assesses the state of Japan's economy and outlook for real estate opportunities.

Recent months have brought heightened fears of a relapse in Japanese growth, however, the report suggests that the weakness in growth reflects an unfortunate and temporary convergence of negative external and domestic headwinds, suggesting that the cyclical slowdown actually belies a more positive undercurrent than suggested by the headline national accounts. We believe that growth is likely to improve this year and next, to a trend of 1.1% for 2016 and 2017 concurrently.

In particular, the report highlights that there are still many fundamental justifications for investing in Tokyo real estate, even amidst tight competition for assets and elevated pricing: The economy remains on stable footing, and the political landscape is complementary of investment demand. Being a core and highly liquid institutional market, there is also a strong safe guard to pricing, in the form of supportive lending policy, a robust capital market and JREIT interests and appetite.

Our research provides additional data for investing in Tokyo specifically. We find that its attractiveness for investing lies in its continued renewal of a young working age population (especially against the rest of the country), which consequently has had, and is likely to continue to have, a positive impact on the property market. While there has been concerns over the Japanese economy and its property market amid a global economic slowdown, Tokyo still remains a strong bed for real estate investments. The recent boost in commercial land values in central Tokyo, allowing land prices in Japan to rise for the first time in eight years, may just be testament to that.

Download the report

Harry Tan

Harry Tan

Head of Research, Asia-Pacific

Harry's biography