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The Japan REIT (Real
Estate Investment Trust) boom
has ended as we forecast in our
January
comment. The Tokyo Stock Exchnage REIT index is now down 7% from its top
reached in May.
However the flow of funds in real estate is continuing.
The balance of Japanese REIT at the end of June 2006 has jumped 73% in
one year to 4.5 TY and the number of listed REIT has doubled to 36.
For the REIF (Real Estate Investment
Fund) which are unlisted the total balance has raised to 5.5 TY or an
increase of 68%. Over 120 companies are managing REIF.
In total, investment in real estate funds has reached 10 Trillion Yen.
Da Vinci advisors Japan largest real estate fund operator now manages
790 BY a rise of 130% in one year.
Institutional investors such as pension funds are buying REIT because
they still offer a yield of
around 3% against 1.8% for Japanese Government Bond (JGB). We expect the interest in REIT
persist as long as the JGB yields remain low despite the recent abandon
of the 0% interest rate policy by the Bank of Japan.
Balance of real estate loans at large banks which hit 4.5 trillion yen
at the end of September 2005, up 50% from a year earlier also help fuel
the real estate investment market. Borrowed money is now estimated to
account for 40-50% of the total assets at REITs.
See also our comments on the REIT market in articles in
Bloomberg and Japan
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