While Japan attracts real estate investment capital from all around the world, recent trends in exchange rates have made it easier for foreign investors to buy real estate in Japan. What we see matches global trends; as the value of their currencies increase, buyers from those countries are showing more desire for Japanese real estate.
Value of Major Currencies up 26% vs the Yen Since 2018
Research shows that on average the value of the major foreign currencies versus the Japanese yen has increased 26% since 2018. While there are some examples that the cost for property in Japan has also increased, the changes in the exchange rate are out-pacing increases in costs. Foreign investors can buy more property with less capital today than they could in recent years. The increasing value of foreign currencies versus the yen is generally true across many major currencies. For example, as of July 2023, one British pound was worth 183 Japanese yen. Compared to the same time in 2022, that same pound was worth 165 yen; giving the pound 11% more spending power in the last year alone. Compared to five years ago in July, that pound was worth 146 yen, or a 25% positive change in value over five years. That 25% increase in the value of the British pound versus the yen gives those holding that currency an increasingly strong incentive to buy in Japan.
Investors Find Good Value in Japanese Real Estate
As the value of the Japanese yen changes, buyers that invest in Japanese real estate can both buy more and see better returns. Where return on investment may have been average in previous years, the current exchange rate could mean buying the same property with less capital, thus improving the return on investment for many real estate deals in Japan. While the cost of some property is up, the strength of foreign buyers’ currencies means that what was a good investment in previous years might be an even better investment today. International investors from countries with strong currencies can buy more than they could five years ago – often much more. This same trend is true for other Western countries like the United States and Australia. As of July 2023, one US dollar was worth 142 Japanese yen, compared to 111 yen in 2018 (a 28% increase in five years). Similarly, in July of this year, one Australian dollar was worth 96 Japanese yen versus 82 yen in 2018 (a 17% increase in the five-year period). The changes in the relative value of the currencies mean that foreigners buying property in Japan are able to get more value for the same investment.
Asian Investors Buying Property in Japan
And while investors from the UK, the US, and Australia have many good reasons to take advantage of current Japanese currency trends, the reality is that a large percentage of the international real estate transactions in Japan are increasingly coming from Asian countries. While the Chinese yuan has been less robust than other developed countries, many neighboring Asian countries have seen gains of over 20% in the value of their currency versus the yen. We can see some leading indicators in the research trends of foreign investors. Mori Nishimura is the founder of the Tokyo-based company JapanPropertyData.com, which provides data and analytics on real estate in Japan. Looking at their own proprietary data set, they see significant activity from Asian investors looking for data on Japanese real estate transactions. While the strongest demand for their data comes from US buyers and analysts (15%), Asian countries like Singapore (14%) and Hong Kong (7%) show increasingly high levels of research activity. Compared to relatively light interest from Australia (3%,) and the UK (2%), the activity from Asian buyers is increasingly notable in the Japanese market.
Singaporean Buyers on The Rise
In terms of foreign investment in Japanese real estate, Singapore stands out as a particularly strong example. In July 2018, one Singapore dollar was worth 81 Japanese yen. As of July 2023, that same dollar was worth 107 yen (a 32% increase in value in five years). Increases in property values in Japan are lower than the change in value of the Singapore dollar, creating opportunities for Singaporeans to find attractive and increasingly profitable real estate deals in Japan. Even with various fees and difficulties associated with international real estate transactions, that increase in buying power is making investment in Japan harder to resist. And what is true in terms of the potential of the Singaporean dollar in Japan is proving to be true in terms of actual transactions. With our own clients at FindHokkaidoAgents.com, we see commonly requests from Singapore, Hong Kong, Taiwan, and other strong Asian economies; approximately 50% of our foreign investor clients come from strong economies in neighboring Asian countries. Local real estate brokers in Japan are seeing genuine interest from Asian buyers, leading to actual purchases.
Hokkaido Real Estate Attracts Asian Buyers
Graeme Glen is a realtor at H2 Christie’s International Real Estate, which operates in Hokkaido, Japan. H2 Christie’s has extensive experience helping foreign clients buy and sell property in Japan. The increasing value of foreign currencies has helped their clients to afford bigger and better property for the same level of investment capital. “Our Asian clients often make the decision to buy as they see Hokkaido as a rare combination of stable government, high quality building construction, ease of foreign ownership, undervalued real estate assets, and solid returns on investment.” — Graeme Glen, H2 Christie’s The specific example of real estate sales in Hokkaido are indicative of larger global trends. Areas like Niseko, where the foreign influence was once predominately Australian, UK, and European, now see increasing property sales from Asian buyers looking for vacation homes in Hokkaido or real estate returns from investments.
Impact on Japanese Real Estate Investors
The changes in the value of the yen are a boon for foreigners, but put some pressure on local Japanese investors as they have to compete with foreign money. When H2 Christie’s has a Hokkaido property for sale, a local buyer may be competing with several foreign offers from stronger economies. The same is true for Tokyo and other major cities in Japan – there is some upward pressure on real estate prices. Many factors make Japan a great place to buy and to hold real estate. The increasing competition and capital from foreign buyers may be contributing to higher prices on some transactions, which can work against local Japanese buyers. However, much of the real estate is being sold by Japanese property owners, many of whom benefit as foreigners bid up purchase prices. It may be that as foreigners can afford to bid higher, the influx of foreign capital will drive up cost and eliminate some of the incentive to buy property in Japan. For now, current trends in real estate in Japan represent a buyers’ market for many foreign real estate investors.
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