After three years, China’s reopening on January 8, 2023 will allow re-entry of its many citizens to the rest of the world. During China’s strict lockdowns, tourism numbers plunged around the world, particularly in the Asia-Pacific region. The impact was so strong that Thailand developed new tourism strategies to attract more Southeast Asians, Europeans and Russians.
In Japan, only about 21,000 Chinese tourists arrived in November 2022, down from 750,000 visitors in November 2019.
If we look back at 2015, a few years prior to the covid-19 disruptions, we see a time when Chinese buyers considered Japan a country of affordable and high-quality property investments for middle-class buyers. Putting it into perspective, USD $1 million would only buy up to 53 sqm of prime residential space in China.
Whereas, in Tokyo, according to estate agency Knight Frank, $1 million would buy at least 40 percent more space, or about 76 sqm. Furthermore, average home prices in China’s majo cities such as Beijing, Shanghai and Shenzhen were up to 44.4 times the average annual disposable income. And investments only generated rental yields of about 2.6 percent.
Yields in Hong Kong and Singapore, popular Chinese offshore investment locations, were not much better. But investors could find yields at four to five percent in Tokyo and Osaka.
Prices fell in Japan
Had the world not been impacted by covid-19, according to property portal, juwai.com, Chinese buyers could have been investing $220 billion per year into global real estate markets by 2020 with a significant portion in Tokyo, Osaka, Kyoto and other major Japanese cities.
How realistically can those numbers still be achieved? The interest is certainly there and growing. In 2020, the number of Chinese who enquired about Japanese properties through Juwai’s website surged by more than 400 percent from Q1 to Q2 in 2020 mostly from investment-driven individuals and families.
They were looking for properties priced between $50K and $500K, both for investment purposes and for personal use. In addition, the falling yen and favourable exchange rates could spur additional movement from Chinese investors into Japanese properties.
Opportunistic buyers could set their sights on price-reduced properties in Kyoto, Japan’s second most popular tourist destination after Tokyo; Osaka, home to Japan’s second-biggest international airport; and Kobe, one of Japan’s biggest commercial ports. However, this central-western commercial hub has seen price drops only slightly less than Tokyo, Yokohama and Kawasaki. Prices also dropped in Hokkaido, an internationally renowned winter destination.
Properties purchased during the 2020 Tokyo Olympic Games have been sold at reduced prices, including distressed hotels facing foreclosure or bankruptcy. And, for the first time since 2011, developers found opportunities to acquire high-quality land at cheaper prices for new housing even in major commercial areas, such as Tokyo’s Kabukicho and Osaka’s Shinsaibashi and Namba where values depreciated by 3 to 6 percent, according to the Ministry of Land, Infrastructure, Transport and Tourism.
Property growth drivers
The upcoming Maglev bullet train anticipated for 2027 running between Tokyo and Nagoya and reducing travel time by 50% is expected to drive up real estate prices along the 6 station routes: Shinagawa Station, Nagoya Station, and the prefectures of Kanagawa, Yamanashi, Nagano, and Gifo.
Similarly, university sectors tend to be resilient to economic downturns. Chinese students currently represent the largest nationality group of close to 40% of international students in Japan, according to the Japan Student Services Organization. Japan will likely continue to be a popular destination because of its prestigious colleges and universities.
Opportunities for distressed properties are abundantly available, albeit, knowing where to find such properties might require the right connections.
Kashif Ansari, co-founder and group chief executive officer of Juwai IQI believes Japan can expect a rush of visitors, business travellers, students, and real estate investors, while outbound travel to Japan could reach 2019 levels by mid-2024 to boost investments.