Property investors are flocking to secure a piece of Japan’s real estate industry ahead of the 2020 Tokyo Olympics.
Naturally, this means a lot of activity by larger, wealthier, and more well-connected investors —however, smaller buyers may soon find themselves empowered to ride the wave thanks to recent developments in technology.
In this article, we’ll be explaining the reasons behind the health and appeal of the real estate market in Japan, and how investors of all sizes and backgrounds can share in the gains.
“Abenomics” and the Three Arrows of Progress
When Japanese Prime Minister Shinzo Abe took office in 2012, he set a new direction for the country’s economic fate. Abe’s expansionary plans, dubbed “Abenomics”, aimed to revitalize Japan’s markets through the use of three measures (“three arrows”) of policy: currency devaluation, greater infrastructure spending, and quantitative easing.
By weakening the yen, lowering exchange rates, and jump-starting the industries for real estate and construction, Abenomics turned Japan into fertile ground for local and international investors.
While the overall impact of Abenomics has met its fair share of criticism, the housing sector has undoubtedly won big. Slow overall growth has done little to stop the steady rise in housing prices over the past few years. If you bought a condominium unit in Tokyo back in 2006, for example, then the value of your investment would have grown by nearly 75% today.
Image from Global Property Guide
Low interest rates and an exceptionally friendly currency make investment appealing, but ultimately, it was the focus on infrastructure that sealed the deal for foreigners looking to profit off of the Japanese experiment.
Local Demand for Real Estate
Of course, government intervention isn’t the only driver of growth in Japan’s housing sector. Local demand has shifted in the past few years, with more people moving to the country’s urban centers.
Despite its enduring rural tradition, a growing number of Japanese youths heed the call of the city: leaving fields and rivers for streetlights and bullet trains. This decline in rural living is a major force in raising the prices of houses, apartments, and condominiums in the city.
Likewise, an increase in the number of double-income households sees more families looking to live closer to the office—aiming for housing within Japan’s numerous commercial hubs instead of facing the challenges of the daily commute. The desire to work close to home is universal, and Japan is experiencing a surge in demand for more accessible living spaces to the benefit of those with the opportunity to provide them.
Finally, demand for housing is on the rise as an externality of the increase in foreign investment that we explained in the last section. As more foreign businesses set up shop on Japanese soil, executives and employees find themselves needing somewhere to stay. By boosting the demand for housing, investors and the people they’ve employed make Japan all the more lucrative for capitalists looking to join in on the fun.
There’s one more force propelling the market for housing in Japan, and it’s the most dramatic by far. With the Japanese capital set to host the Summer Olympics in 2020, luxury housing projects (e.g. hotels, serviced apartments) are on the rise. The Japanese, alongside foreigners with the money and interest, are laying the groundwork for the most well-attended and high-valued global event until Paris hosts the competition in 2024.
Image from Mark Szelitowski
Billions of dollars are on the move, and all roads lead to Japan. The country has seen massive deals moving at high speeds in recent times, and it shows no signs of slowing down as the clock ticks towards 2020. Norway’s government pension fund, for instance, has partnered with Tokyu Fudosan to invest roughly $1.2bn in five different commercial buildings ahead of the global event.
Whether the gains last beyond Olympics season is anyone’s guess, but the staggering medium-term growth between now and the competition proper are a sure deal.
Buying Into Japanese Real Estate
Anyone with the means to invest in housing in Japan is moving to get in on the action. This means the stereotypical club of businessmen and corporations shuffling numbers around to the tune of billions: more of the same old song and dance.
However, recent advances in blockchain technology have inspired the personal finance sector to innovate the way real estate is traded on an international scale.
BitOfProperty, for example, is a crowd investment platform that specializes in real estate assets. Our listed properties represent real houses, apartments, and condominiums in countries like Japan, which our users can purchase in shares (or “Bits”) similar to how the stock exchange works. Unlike many other financial tools, however, Bits of property can yield dividends—monthly income that goes straight to investors when the property begins earning rent.
All of this is protected by Ethereum Blockchain to provide users with immutable records of ownership. Once you’ve secured an investment in property through the platform, your investment is safe from theft and any other unsanctioned activity.
We are confident that our own venture into the Japanese housing market will be a success, thanks in large part to our strategic shareholder: LIFULL. By partnering with LIFULL, a reputable and publicly traded real estate and finance firm, we’re making good on our commitment to educate our investors and help them understand more about Japan and its real estate market.
This is just the first of many projects to come from Japan, and the start of a bigger collaboration between BitOfProperty and LIFULL. Soon, the dream of cashing in on Japan’s soaring property market will be open to investors of all sizes—including private individuals who can spend €50 or higher for a cut of the impending windfall. Anyone with a reasonable budget to invest can cash in on an Airbnb unit in Shibuya during peak seasons, or a serviced apartment in the heart of Ginza.
Whatever you might hear about the Japanese economy for better or worse, the market for urban housing is on a steady climb. Thanks to a variety of conditions that make investing in property in Japan a more affordable and comparatively smarter decision than elsewhere in the region, units, homes, and buildings are a hot commodity.
Developments in the personal finance sector make buying into the investment a reality for smaller investors, so time is of the essence. The best time to buy was a few years ago, but the door remains wide open for the enterprising few who are willing to seize the opportunity.