Amid the struggles faced by major Chinese real estate developers like Evergrande, the real estate market in China has been stagnant and continues to underperform. Market consulting firms have indicated that with the decreasing return on investments in the Chinese mainland housing market over the past four years, global investors, including those from Hong Kong, are shifting their investments towards the residential market in Japan.
According to a report by the South China Morning Post on June 22nd, data compiled by international real estate management company, Colliers International, shows that in the first quarter of this year, global investors poured $11.2 billion into the Japanese residential market, marking a 6% increase over the five-year average and establishing Japan as the fourth-largest real estate investment destination globally. The report highlighted that investors from the United States, Singapore, and Hong Kong were the top three regions contributing to the inflow of funds.
Even investors from the Chinese mainland are turning their attention towards the East. During this period, they have invested $1 billion in the Japanese residential market, more than double the average of $428 million over the past five years. Data from real estate firm Jones Lang LaSalle reveals that in the residential sector, both domestic and foreign funds in Japan accumulated a total investment of $1.2 billion in the first quarter, marking a 16% increase from the same period last year.
Masahiro Tanikawa, Colliers International’s head of Japan investment services, stated, “Hong Kong investors traditionally focused more on the mainland Chinese market, but with the collapse of the Chinese real estate market, they are redirecting their capital towards more stable markets like Japan and Australia.”
Investors are steering away from the Chinese mainland as the country has been facing a continuous debt crisis since 2020, leading to a 24-month consecutive decline in new home prices. This situation has coincided with the depreciation of the Japanese yen, enhancing the attractiveness of Japanese assets for foreign investments.
Over the past month, the Japanese yen has depreciated by approximately 1% against the US dollar, with a cumulative 9% depreciation over the past 12 months. In January, Japan’s inflation rate reached 4%, hitting a two-year high, before dropping to 3.5% last month.
In a statement released on June 10th, Weave Living, a Hong Kong-based shared living real estate operator, and US private equity firm KKR acquired six properties in upscale communities such as Roppongi, Minamiazabu, and Shirokane in Tokyo. This acquisition has expanded their investment portfolio in Japan to 17 properties.
MindWorks Properties, a subsidiary of Hong Kong venture capital company MindWorks Capital, purchased a multi-family apartment building, Haven Shibaura, in the Minato ward of Tokyo, marking their official entry into the Japanese market.
Pamela Ambler, Managing Director of Capital Markets Research for Asia Pacific at Colliers International, stated that Japan, known for its culture, cuisine, and cherry blossoms, has been generating over 5% annual total returns since 2012 through lucrative rent income and high occupancy rates, expecting to attract $4.3 billion in real estate investments by 2024.
Moreover, amidst growing dissatisfaction with the Beijing authoritarian regime, an increasing number of wealthy Chinese individuals are expediting their migration to Japan after the zero-clearance period of the COVID-19 pandemic. As of the end of 2023, Japan had approximately 822,000 Chinese residents, an increase of 60,000 from the previous year, marking one of the largest growth rates in recent years.
According to a report by The Wall Street Journal, Osamu Orihara, a Tokyo real estate broker who was born in China and acquired Japanese citizenship, stated that his income has doubled or quadrupled compared to 2019, largely driven by Chinese buyers.
“Unlike in the past, there are more people (from China) looking to obtain long-term visas,” Orihara told the publication.
The report highlighted that approximately one-third of the apartments in the 48-story building where Hayashi resides are owned by individuals with Chinese names or companies represented by individuals with Chinese names. Residents in the upscale towers near Tokyo Bay mentioned that this typical building has a quarter or more of Chinese residents.