Chinese property buyers hit Japan’s shores, pushing up prices

TOKYO — The trend has already hit Sydney, Vancouver and the United States. Now it is happening in Japan: Busloads of real estate buyers from China coming in, buying up homes and pushing prices higher.

Realty agencies in Beijing are organising twice-monthly tours to Tokyo and Osaka, where 40 Chinese at a time come for three-day property-shopping trips, seeking safe places to invest their cash abroad.

They are being prompted by the yen’s decline to 22-year lows and excitement over the 2020 Tokyo Olympics driving up prices, as they did in Beijing in 2008. Property tours will soon start from Shanghai too.

Partly as a result of nascent Chinese buying, Tokyo apartment prices have reached the highest levels since the early 1990s, up 11 per cent over two years, according to the Real Estate Economic Institute.

“The demand is like water exploding up from a well,” said Mr Zhou Yinan, an Osaka-based agent at Chinese brokerage SouFun Holdings, who said his mainland buyers are about 20 per cent more numerous than at this time last year.

“The Chinese buyers had mainly been from Taiwan until last year, but that trend reversed since October as the yen weakened against the yuan.”

Thousands more mainland Chinese are coming on their own, hitting real estate agencies in Tokyo’s Ikebukuro Chinatown district, where classified advertisements, including properties for sale, are seen piled up in free Chinese newspapers outside a Chinese supermarket that sells frozen dumplings and spicy sauces.

PAYING CASH

“There are so many Chinese buyers recently,” said Ms Song Zhiyan, a broker at BestOne Co realty in Ikebukuro, who uses the messaging application WeChat to reach thousands of potential customers in China, who can then fly to town to complete purchases. “I work only with clients who can pay cash. Why waste everyone’s time?”

She tells them to hurry. Properties are gone so fast that those who try to negotiate the price find them already sold. Her transaction volume exclusively for mainlanders buying in Tokyo has tripled over the past six months, she said.

Demand is so strong that some developers have put a quota on the number of new apartments sold to foreigners, said Mr Kenny Ho, Tokyo-based managing director at Sinyi Realty, a Taiwanese brokerage with outlets in Japan.

Some developers will not sell more than 20 per cent of total units to foreigners, he said, declining to name the developers.

“Japan has its own way of doing things,” he said. “Some people feel that if there are too many foreigners, that may affect the quality of the living environment.”

Japan’s sluggish economy caused price gains in Tokyo to trail those in other urban centres such as New York, London and Hong Kong since the 2008 global credit crisis. Buying from China, which created about a million millionaires last year, according to the Boston Consulting Group, has the potential to quickly change the dynamics of local property markets.

In the US, buyers from China, Hong Kong and Taiwan spent US$28.6 billion (S$38.5 billion) on homes in the 12 months through March, becoming the largest group of foreign homebuyers for the first time, according to an annual report by the National Association of Realtors.

The Chinese already buy almost a quarter of new homes in Sydney, and their outlay will more than double to A$60 billion (S$61 billion) in the six years to 2020, Credit Suisse Group estimates.

HIGHER YIELDS

In Japan, sales at Sinyi Realty to Chinese and Taiwanese buyers jumped 70 per cent in the first three months of the year from the year-earlier period, or ¥11.1 billion (S$122 million). For every 100 new apartments sold, about 10 to 15 are to foreigners from other parts of Asia, according to Sinyi.

“I wouldn’t find a deal like this in China,” said Ms Lin Huan, a 35-year programmer from China’s north-east Liaoning province who, with help from her parents, bought a three-bedroom flat in the Shinbashi area of Tokyo for investment, paying the equivalent of US$203,000. After recently relocating to Tokyo to work for an technology company, she noticed the weaker yen was making properties cheaper. She expects to make a 5 per cent return on the rent annually, whereas property in Beijing yields just 2 per cent.

Chinese buyers are typically purchasing in the 1 million yuan (S$217,000) to 2 million yuan bracket, a range “tolerable to many Chinese”, said Gui Liangjing, SouFun’s international sales director in Beijing.

It is not as tolerable to the Japanese. Prices in Tokyo have become “seriously unaffordable”, the annual Demographia International Housing Affordability Survey showed.

The percentage of Japanese in the seven biggest cities who wanted to buy a home dropped to 15.4 per cent in December, the lowest level since Recruit Sumai started surveying two years ago. Though the figure rose to 18 per cent in March, those who planned to “take action” by looking or buying declined, the survey showed.

Still, prices are lower than in comparable global cities. The average price of a three-bedroom apartment in Tokyo’s 23 wards and surrounding prefectures in April was ¥53.1 million, or S$583,000, according to the Real Estate Economic Institute.

It is HK$8.4 million (S$1.46 million) for a 600 sq ft apartment on Hong Kong Island, according to calculations based on government records, and US$554,200, or S$747,000, for homes in New York, according to Zillow Inc.

“Prices have risen while incomes and rents remain the same,” said Mr Tomohiko Taniyama, a senior researcher at Nomura Research Institute. “No regular salaryman will find apartments cheap in Tokyo.”

While the home-price-to-income ratio, or the cost of a home relative to a buyer’s average annual income, rose to more than 10 times in Tokyo last year, according to property appraisal company Tokyo Kantei, it is still below the 18 times it reached during the bubble era in the late 1980s and early 1990s.

Homes are unlikely to become more affordable, with the yen’s 41 per cent decline over two-and-a-half years and with Japan’s higher investment yields compared with some major cities abroad propelling foreigners to buy.

While Japan remains small by total transaction value compared with the US, Canada and Australia, it is “comparable” to those markets in terms of the number of clients seeking deals, said Gui of SouFun realty.

“Properties in Tokyo are cheap and the returns are relatively high,” said Mr Taniyama.

“The quality of buildings is high while investment opportunities are abundant, unlike Singapore or Hong Kong where the number of available properties is limited. In that sense, Tokyo is one of the best destinations for investment.” BLOOMBERG