Terrie's Take 792 (Tourism Edition) -- Japan's Own "Snow Bird" Real Estate Boom
terrie at mailman.japaninc.com
Sun Feb 15 23:32:57 JST 2015
* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie
Lloyd, a long-term technology and media entrepreneur living in Japan.
Tourism Sector Edition Sunday, February 15, 2015, Issue No. 792
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+++ JAPAN'S OWN "SNOW BIRD" REAL ESTATE BOOM
It was a beautiful if somewhat chilly day in Tokyo on Saturday, and
the first signs of spring were in the air. I took a bike ride out to
Odaiba, and out of curiosity detoured to view the construction work
going on at the massive new Olympic Village complex just getting
started at Harumi. Traversing the new bridge from Odaiba to Harumi you
get a grandstand view of the 109 acres of excavation, footings, and
emerging buildings -- trucks, workers, concrete, and steel everywhere.
It's really quite impressive, and the site is supposed to be the
biggest single housing complex in Tokyo in the last 42 years. A great
photo opportunity, if you can remember to take your camera...! :-)
Once completed, the Harumi Olympic Village will have 10,860
residential units and will house most of the incoming athletes. Then
after the Olympics the units will be refurbished and sold off as
luxury apartments to those wishing a front-row view of the Rainbow
bridge and the downtown Tokyo skyline across the water. While
apartment prices in Harumi are currently set at around JPY830,000/sq.
m. (i.e., about JPY58MM-JPY60MM for a typical 70 sq. m. place),
expectations are that after the local population starts to feel the
buzz, egged on by strong interest from Chinese and SE Asian buyers,
that prices will start zooming up.
How far? Well, given the fact that the area will be brimming with
buzzing training gyms, seaside restaurants, and landscaped expanses of
grass and trees, and given that it's fashion and location that will be
driving demand, we think you can look at other fashionable desirable
locations in Tokyo for an indication. For example, further inland in
Harajuku, which has Yoyogi park and lots of trendy shops and cafes
nearby, new luxury apartments are typically priced at
JPY1,200,000~/sq. m., and so we would not be surprised to see the
Harumi apartments fetching similar prices in 2021. That's a lot of
capital gains upside to drive demand for a while.
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And sure enough, riding on past the current centerpiece of
construction, I found a who's who of construction company and land
developer sign boards, indicating these firms are planning one massive
project after another. The International Olympic Committee reckons
that the property sector in the area will enjoy sales of up to
JPY152bn in the run-up to the Games, while the economic benefit felt
by the construction industry will be around JPY475bn. Since the number
of people living in the area is expected to swell from 11,030 in 2010
to 47,000 by 2016, we suppose that local shops and merchants won't do
too badly, either.
Seeing so much activity centered on a single construction site drives
home the potential for a real estate boom in Tokyo over the next five
years, however, I also think the foreigner-fueled land boom will have
reverberations beyond the capital. Already Japan is becoming one of
the premier holiday destinations for wealthy people in Asia, and as
they start to come multiple times a year, we think it won't be too
long before we start seeing the same phenomenon here that Florida has
with Canadians -- the so-called "snowbird" visitor/property owners.
In 2014, Canadians accounted for about one third of the properties
purchased by foreigners in Florida. They spent US$2.2bn last year
alone, the seventh straight year in a row that Canadians were the top
buyers in the state. As a result, house prices that back in the Lehman
Shock ran for around US$50,000-US$100,000 now have a median sales
price of US$260,000. 89% of the purchases were cash transactions,
indicating that most buyers are well off, and their main target was
vacation condos in major cities.
While the Canadians are seeking sun and relaxation in Florida, we
believe the Chinese are looking at Japan more for high-grade dining,
clean air, good shopping, and easy access to sights and entertainment.
Their main targets are apartments in Tokyo, Osaka, and Fukuoka. Then
for those buyers coming from further south, SE Asians seem to want to
add in snow, onsens, scenery, as well as more modestly priced
permanent accommodation. This means that they are not only in the
major cities, but also exploring secondary cities and ski resorts,
especially those near onsen.
And why not? Especially when you can get 536 sq. m. of ready-to-build
land in Hakuba for just JPY1,000/sq. m. just 800m away from the ski
lifts. You can put up a log cabin for JPY10m (yeah, twice the cost of
the land) and you have a cosy, low-rates hide-away for the family to
go to every winter and summer break.
In fact, the cost of land up in the snowy alps of Japan is so
incredibly cheap at the moment, that with the recent devaluation of
the yen I feel it is only a matter of time before foreign buyers start
to discover just what a bargain Japan is. By no means remote or
inconvenient, you can get an acre of land with an existing house in
Minakami, within 5km-10km of at least 3 ski fields, for as little as
JPY5m. Or, if you want to move a bit further to the south, to Miyoko,
you can get an entire hotel (we kid you not) on 48,000 sq. m. of land,
for just JPY8m!
OK, there is a catch with the hotel... It's derelict and will cost
hundreds of thousands of dollars (maybe several million) to refurbish.
Still, with 57 guest rooms and a staff dorm for 13, it's going to be a
bargain "do-up" for someone.
Back in Tokyo, already the flow of foreign investment into private
real estate (versus commercial) is ramping up remarkably. CBRE reckons
that foreign investment in Japanese real estate overall in 2013 was up
an incredible 79% over 2012. We're guessing that this year will see
similar expansion. Jones Lang LaSalle says that Chinese investors
alone have bought JPY10bn of private apartments since 2011. It's easy
to see why, when for for JPY15m, a low-end investor can get a
refurbished 70 sq. m. apartment downtown and a rental return of
JPY60,000/month. In comparison, that same money doesn't even buy a
parking lot in Hong Kong.
We're not quite at the buying levels of the Canadians in Florida yet,
but certainly the trend is there.
Will a flood of foreign buyers stimulate a protectionist backlash by
the Japanese? Probably "Yes", especially where the Chinese are
involved, since they are such a red flag to right wing politicians.
Already there have been murmurs from Kasumigaseki of the need for
controls on properties that comprise water catchment and forestry
areas, as well as locations that are politically or militarily
sensitive. But right now, and perhaps for as long as the next 3-5
years (as long as it takes for the right wing to gather a head of
steam and translate that into legislation), there are currently NO
laws or regulations to prohibit the purchase of Japanese real estate
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+++ ABOUT US
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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