Japan has been posting encouraging economic numbers since Prime Minister Shinzo Abe’s election in 2012. For the most part, his growth-focused “Abenomics policies” seem to be working.
It has led to positive sentiment in Japan, and among institutional investors considering Japan, and the country is forecasting modest, but steady 1% to 2% GDP growth to 2020 at the very least.
The infrastructure boom resulting from Tokyo’s winning bid to host the 2020 Olympic Summer Games is, unlike in Rio de Janeiro, helping the city progress.
“Brazilian real estate was among the hottest in the world not too long ago,” says Akihiko Mizuno, international director and head of capital markets at JLL in Tokyo.
“As an established global, mega city, the economic scale of Tokyo is much larger compared to Rio, so the magnitude of the impact the Olympics will have on Tokyo will be much smaller than that on Rio.”
Steady as She Goes
Across the board, Tokyo’s key property indicators are all trending up: contract rates in the central five wards currently average 90%, with take-up rates just under 80%, representing almost all of the supply that becomes available; the Hong Kong dollar is the strongest it’s been against the Yen since 2011; demographics are positive, as the population has grown 34% in central Tokyo since 2000; and second-hand unit prices are sitting at a nine-year high, averaging JPY600,000 per square metre, or HK$4,100 per square foot.
In upmarket projects, capital appreciation has reached 26% over the past two years. That’s all good news for investors.
“Despite recent fluctuations in the Yen, the underlying fundamentals of Tokyo’s real estate market remain strong. Japan was the third largest global economy with a GDP of US$4.1 trillion for 2015, and Tokyo remains the country’s key growth driver, responsible for US$1.9 trillion in the same period,” says IP Global’s head of investment, Elizabeth Chu.
“Ranked against other major cities on an affordability basis, Tokyo is among the most affordable tier-one cities globally.”
On the downside, however, is financing. Though it has become more flexible in recent years with more banks willing to lend on Tokyo properties, financing for non-residents in Japan is complex.
“Financing via traditional Japanese banks remains one of the key challenges for foreigners looking to invest in Tokyo,” Chu says.
“However, the number of non-traditional sources of finance for investment in Japan appears to be growing, with new avenues, including foreign banks and private equity firms.”
Mizuno points to Singapore’s OCBC and ORIX as two options, both with offices in Hong Kong.
Shibuya on the Rise
One of Tokyo’s five major central wards (along with Shinjuku, Chuo, Minato and Chiyoda), Shibuya-ku is arguably the one to watch.
Though Tokyo’s 23 wards have outperformed Japan as a whole in the past decade, and the Big Five even better, Shibuya ranks near the top of that elite.
Residential land prices in Shibuya have been steadily rising since plummeting after the bubble burst in 1992. Ten per cent of Tokyo’s major listed companies have offices there; it is the city’s retail hub and home to most of its large-scale retailers; it sits in the top three for sales prices; its residents boast the second highest average incomes in Tokyo; and major urban regeneration is planned from now until 2027.
Given all those factors, UK-based Grosvenor’s freshly launched The Westminster Nanpeidai ticks several investor boxes.
The redeveloped office block designed by Eric Parry Architects (Damai Suria, Kuala Lumpur, The Spa at Mandarin Oriental Hyde Park London) is intensely Japanese in its design aesthetic, while incorporating as many international-level features as possible.
Westminster Nanpeidai comprises 52 one to three-bedroom residences in two connected buildings ranging in size from 646 to 1,690 square feet. Aside from the appeal of the extremely rare two and three-bedroom units in a traditional rental market such as Tokyo, Grosvenor is effectively the only international high-end developer operating in Tokyo right now.
“The Westminster Nanpeidai follows on from The Westminster Roppongi, a very successful project which saw 40% of buyers coming from overseas,” says Noritaka Noma, head of sales and marketing for Japan at Grosvenor Asia Pacific.
“We are confident the property’s unique location and exceptional design quality will see it perform well in international markets, where we are targeting around 20% overseas buyers this time around.”
In addition to Eric Parry, Grosvenor tapped renowned craftsman from across Japan to enhance the little details (such as Cyprus wood bathing tubs) that will contribute to the building’s luxury: stone artist Masatoshi Izumi, clay wall craftsman Shuhei Hasado and lighting designer Satoshi Uchihara, best known for his work on the Golden Temple in Kyoto.
“Not many developers appoint a lighting designer in a residential property, but we know lighting is such an important part of a home,” Noma says.
Other features and amenities at The Westminster Nanpeidai include the first bilingual concierge at a Grosvenor property in Tokyo, a shared rooftop garden and a full gym – elements that are quite extravagant for the city.
“Land in Tokyo is very rare and footprints are very small, so only the mega-projects like Roppongi Hills have [spas and pools].
“It’s four towers and even it doesn’t have facilities in each tower. Those 800 units share one swimming pool. Unfortunately that’s a Tokyo standard.”
Fortunately, the property is located only a few minutes’ walk from Shibuya Station and the chic, sophisticated Daikanyama (and train station) in one of Tokyo’s hard-to-come-by green pockets, and only a few minutes from Yoyogi Park.