PROPERTY interview with Mori Nishimura, Sales Division, Housing Japan
Tokyo Market Report, 2020 Tokyo’s property market in 2020 would have been very bullish had the Olympics been held, but the Covid-19 pandemic has upended that scenario. The unfortunate delay of the Olympics has been overshadowed by the complete shutdown of inbound tourism and a state of emergency in April and May. The resultant economic impact is only starting to play out. Although it is still very early to predict the longterm impact of the virus, it is likely that buyers will find residential and commercial acquisition opportunities. So far, sectors have been affected variously. The hotel sector has seen an immediate negative impact from the collapse in demand, and we will likely see non-performing assets come on to the market as early as summer 2020. Investors should use this opportunity to acquire prime assets or assets at significantly reduced prices. Alfie Goodrich (AG): Nishimura-san, setting Covid-19 aside, could you describe some of the major trends we have seen in the Tokyo residential market recently? Nishimura Mori (NM): Since Tokyo won its bid to host the 2020 Olympics, prices for new apartments and condominiums have been rising. Together with the government’s easing of monetary policy and consistently low interest rates, this has created a prosperous marketplace in Tokyo, especially. Over the past couple of years, we’ve seen shortages of construction materials and labour because of events like the 2019 Rugby World Cup and the Olympics. Both shortages have caused construction costs to rise. Competition for land is also quite fierce. According to the chika koji (Commercial Government Assessed Land Values) price report, land prices are currently rising
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at levels not seen for almost 25 years, although this applies more to the commercial sector than the residential one. Developers have been scrambling to find land, building but not selling aggressively, meaning they have plenty of stock but are trying to avoid an oversupply of units. One reason is the high price of new apartments at the moment. Sales of new apartments are slowly decreasing, and buyers are flowing to the second-hand market. For the first time, the market has more second-hand properties than new. Yet developers aren’t in a rush. They believe the price of land and the price of construction aren’t going to decrease anytime soon, so they continue to acquire land and build on it. Sumitomo Realty & Development, in particular, have a very large apartment stock in Tokyo but aren’t particularly in a rush to sell. Another trend is that major developers such as Sumitomo, Mitsui, Mitsubishi, Daiwa and those based abroad, notably Pembroke & Grosvenor, are entering the “refurbish and sell” market. I have had many acquisition specialists tell me they are having an extremely difficult time acquiring developable land, and they don’t know what to do. In other words, the developers’ margin for new build development has diminished. They are turning to refurbishing. Though once not a business for them, it is now something they are going to have to learn to do. AG: What are the most significant investments from overseas in Japan’s residential property sector right now? NM: We’ve just had an announcement by Blackstone which is very significant. They have paid a record price—around $2.7bn—to buy back a
