While a lot of excitement over a weakening yen has been focused on the boost it may give to Japan’s exports, in Tokyo, the depreciating currency may be acting as a tailwind for a quiet boom in high-end private real estate.
According to Tokyu Land Corp. 8815.TO +4.34%, Japan’s fourth-largest real estate group, investors from other countries in Asia have been increasing their purchases of high-end real estate in Japan’s capital since the start of the year.
“We’ve especially seen a rise in investors from Singapore,” Takumi Mochizuki, a Tokyu Land spokesman, told JRT last week.
High-end properties in districts such as Roppongi – where many foreign financial corporations are headquartered – are especially popular, Mr. Mochizuki said.
“For outside investors, these properties have essentially become 30% cheaper,” said Mr. Mochizuki, referring to the 27% drop of the yen versus the dollar since November last year. That drop has been precipitated by the aggressive anti-deflation policies of Prime Minister Shinzo Abe — and in particular his push for a dramatic increase in the amount of cash the central bank pumps into the economy, a measure that generally has the added effect of decreasing the value of the currency.
The dollar has been appreciating strongly against the yen since the middle of November last year, and last week rose to 100 yen for the first time in 4 years and one month.
The Japan branch of Jones Lang LaSalle JLL -0.13%, a global realty corporation, also said that high-end domestic property aimed at affluent individuals from abroad is selling well.
“We’ve been holding four or five corporate events aimed at affluent individuals in Singapore since November last year,” spokesman Tomoyuki Suzuki told JRT. Sales at those talks have been largely successful, with “roughly 40% of customers” deciding to buy, said Mr. Suzuki. Properties average ¥50-¥70 million in worth, he said. Jones Lang LaSalle plans to hold similar events with potential customers in Hong Kong as well this summer, he said.
There are a variety of reasons for the investor interest in high-end property, Mr. Suzuki said, starting with a two-decade slump in land prices that have pushed them close to 80% below their peak in 1991. “Property prices have stagnated for the past 20 years. I think there are many investors who think prices will begin to rise from now on,” said Mr. Suzuki. “Many have also been considering widening their portfolio (to include Japan), in addition to places like London and Australia.”
“The weak yen has been a good reason to follow through on these needs,” he said.
http://blogs.wsj.com/japanrealtime/2013/05/13/weak-yen-helps-push-high-end-real-estate-sales/
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