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Tokyo property to shine despite economic uncertainty

Nikkei Asian Review

As featured by Nikkei Asian Review, Harry Tan (Head of Research, Asia-Pacific) talks about the real estate market in Tokyo.

April's earthquakes on the southern island of Kyushu have heightened downside risks to the Japanese economy, which is already facing headwinds from uneven global demand, especially the slowdown in China, as well as financial market volatility and tightened U.S. monetary policy. Even though the quake will have a moderate negative impact on short-term economic momentum and growth, it is not likely to affect medium-term purchasing sentiment and capital interest in the Tokyo real estate market.

Compared to the Kobe and Tohoku earthquakes of 2005 and 2011, respectively, the damage this time appears to be much smaller. Furthermore, current economic conditions are better underpinned by the positive tailwinds from the 2013 onset of Abenomics. Investors this time are therefore not likely to react as negatively and will probably instead stay focused on the longer-term prospects of the economy, Abenomics and the property market heading into the 2020 Tokyo Olympics.  

The appreciation of the yen is also not likely to sidetrack institutional investors' appetite: unlike retail investors, institutional funds looking at longer-term investment horizons are more focused on the fundamentals of project-level returns. Furthermore, most global investors use currency hedges which will mitigate any potential hit on returns.

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This article is intended solely for the use of professionals and is not for general public distribution. Any assumptions made or opinions expressed are as of the dates specified or if none at the article date and may change as subsequent conditions vary. In particular, the article has been prepared by reference to current tax and legal considerations that may alter in the future. The article may contain "forward-looking" information or estimates that are not purely historical in nature. Such information may include, among other things, illustrative projections and forecasts. There is no guarantee that any projections or forecasts made will come to pass. International investing involves risks, including risks related to foreign currency, limited liquidity particularly where the underlying asset comprises real estate, less government regulation in some jurisdictions, and the possibility of substantial volatility due to adverse political, economic or other developments. Past performance is no guarantee of future performance. The value of investments and the income from them may go down as well as up and are not guaranteed. Rates of exchange may cause the value of investments to go up or down. Any favourable tax treatment is subject to government legislation and as such may not be maintained. The valuation of property is generally a matter of valuer’s opinion rather than fact. The amount raised when a property is sold may be less than the valuation. Nothing in this article is intended or should be construed as advice. The document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. TH Real Estate is a name under which Henderson Real Estate Asset Management Limited provides investment products and services. Issued by Henderson Real Estate Asset Management Limited (reg. no. 2137726), (incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3BN) which is authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored. COMP201600143

Harry Tan

Harry Tan

Head of Research, Asia-Pacific

Harry's biography