There is currently a boom in real estate construction and investments in Japan.
The main reason for this boom is the gap between real estate returns
which are still around 6% and the long term interest on JGB (Japan 10 years Government
Bond yields around 1.8% as of July 2004). As a result, developers backed
by investors foreign and Japanese, are launching massive scale
construction in Tokyo and investors are borrowing heavily to
take advantage of cheap money. In addition, factors that contribute to real
estate boom are:
-
Introduction of
REIT (Real Estate Investment
Trust) law
- Easing of regulations limiting height of buildings in the center of
Tokyo that lifted the last obstacles for investor interest to develop.
- Authorization given in July 2003, to pension funds to invest in REIT
(US pension funds typically invest 5 to 10% of their assets in Real
Estate in the US). Japanese are just starting.
Another booming Real Estate investment vehicle are REIF which are
privately placed REIT.
Further proof of the profitability of Japan Real Estate market are the
recent investments in Japan by major US REIT.
In parallel Japanese investors (institutionals and retails) are staring
to diversify their investment in US REIT.
JMC offers a wide range of services in these domains with its partner
companies.
Also see Eric Perraudin
quoted in the Japan Times article about real estate by Max Sato on
March 29 and Eric
Perraudin quoted by Bloomberg |