Aug 06, 2013

    Asian investors bank on Tokyo homes

    WHEN Taiwanese Julia Chang, who divides her time between Taiwan and Tokyo, decided to diversify her family's overseas investments, she settled on real estate in the Japanese capital where prices have slumped for 20 years.

    Ms Chang, 48, a former flight attendant, is looking to buy her third apartment in Tokyo, which is increasingly attracting foreign buyers after Prime Minister Shinzo Abe took office in December with a pledge to end the deflation that has depressed real estate.

    Asian investors like Ms Chang are being lured by returns as high as 8 per cent on rental income and signs that the property market is recovering.

    The government's resolve to keep the yen weak has also made real estate in Japan more affordable, compared with Hong Kong, Singapore and Taiwan, where governments have been struggling to contain surging residential prices.

    "Japan is cheap considering how much property prices have gained in Singapore and Hong Kong," said Mr Akihiko Mizuno, international director and head of capital markets at Jones Lang LaSalle.

    Home prices in Tokyo are around 120,000 yen (S$1,540) to 150,000 yen per square foot (psf), said Chicago-based Jones Lang LaSalle.

    That compares with about 280,000 yen to 400,000 yen in Hong Kong and 200,000 yen to 250,000 yen in Singapore, it said.

    In New York, the average price for a Manhattan condo is US$1,381 (S$1,755) psf, according to appraiser Miller Samuel and brokerage Douglas Elliman Real Estate.

    Property prices in major Japanese cities are still less than half their peak at the height of the bubble economy in the 1980s.

    The average price of a three-bedroom apartment in Tokyo and surrounding prefectures rose 7.9 per cent in June from a year earlier to 48.3 million yen (S$620,000), said the Real Estate Economic Institute.

    The average price of a new 1,000 sq ft condominium in Singapore is between S$1 million and S$1.2 million, said Savills. A 1,076 sq ft unit on Hong Kong Island cost an average of HK$19.1 million (S$3.1 million) at the end of May, said the Ratings and Valuation Department.

    Investment in the luxury residential market that has driven major Asian cities is now finding its way to Tokyo, said Mr Sanjay Verma, chief executive officer for the Asia-Pacific region at broker Cushman & Wakefield.

    Ms Chang's US$1.7-million three-bedroom apartment, located in Kojimachi in Tokyo's Chiyoda-ku, has a view of the Imperial Palace.

    "When making an investment, you want to buy when prices are low and with relatively low risks," she said.