Global wealth funds are moving to buy more Tokyo properties to take advantage of rising prices in the Japanese capital, one of the highest-ranking officials at the land ministry said.
“Long-term pension funds in the U.S. and Europe, particularly in Scandinavia, are looking to lift their positions” in Japanese real estate, Kisaburo Ishii, a vice minister at the ministry, said March 30.
“They have been underweight Japanese real estate.” Norway’s $870 billion wealth fund is preparing to purchase properties in Tokyo after scouring Asia for investment opportunities, Karsten Kallevig, head of real estate investments at the Oslo-based fund, said March 20.
Commercial property prices in Tokyo rose 2.9 percent last year, after a 2.3 percent gain in 2013, as foreign investors, including Singapore’s sovereign wealth fund, GIC Pte, snapped up assets.
For large pension funds, “there is quite a lot of movement to make up for the shortfall” of Japanese real estate in global portfolios, Ishii said.
Land prices in Japan’s three-largest metropolitan areas gained for a second consecutive year as stimulus from the Bank of Japan pushed domestic borrowing costs to a record low and investors globally chase higher-yielding assets.
GIC paid $1.7 billion for a building in the business district, next to the Tokyo Station, in October. Blackstone Group LP agreed in November to buy GE Japan Corp.’s residential-property business for more than 190 billion yen ($1.6 billion).
“For developers in London, the idea of bringing in money from the Continent, be it France, Germany, or from the Middle East, is there at the very beginning,” said Ishii. “In Japan, the mindset has been to move money around locally.”
Investor Conference
The first MIPIM Japan real estate conference being held in Tokyo May 20 and May 21 has drawn participants from 20 countries. Ishii attended the MIPIM conference in Cannes, France, last month, a gathering of the world’s biggest property investors.
“You’ve got a resurgence of European and North American life insurance companies, who are saying Japan has got to get back on our investment list,” said Christian Mancini, chief executive officer of North East Asia at Savills Plc, a property services company.
“There is no shortage of interested capital.”
Still, Japanese real estate companies and listed real estate investment trusts are able to box overseas investors out of many transactions as they can move more quickly, know the market better, and can often obtain finance more cheaply from local banks, according to Mancini.
Cross-border investment into Japanese real estate made up about 16 percent of the total last year on deals of more than $10 million, an increase on the previous year, though still below about 25 percent seen in 2007, Mancini said.
Bubble Risk
The Topix Real Estate Index rose 1 percent today, the second-biggest gainer among industry groups in the benchmark, which retreated 0.9 percent after the BOJ’s Tankan survey showed large manufacturers see business conditions weakening.
The increase in land prices since Prime Minister Shinzo Abe came to power with the promise to end deflation has prompted Mizuho Securities Co. to urge investors to be mindful about the risk of a bubble from the BOJ’s monetary stimulus.
Investment in Japanese real estate by foreign investors more than doubled to a record 981.8 billion yen last year, according to the Tokyo-based Urban Research Institute Corp.
Ishii, who oversaw insolvency cases of Japanese financial institutions in the late 1990s at what evolved into the Financial Services Agency when a real estate bubble dating back to previous decade burst, said he is not concerned. Nationwide, land prices fell 0.3 percent last year, and have only risen twice on a year-on-year basis in two of the last 24 years.
“It’s true that in certain areas there are a lot of investors wanting to buy and we have see some very high numbers,” he said. “In a bubble, you see things with no value attract speculative bids, and that is different to what is happening right now.”
yahoo.com
“Long-term pension funds in the U.S. and Europe, particularly in Scandinavia, are looking to lift their positions” in Japanese real estate, Kisaburo Ishii, a vice minister at the ministry, said March 30.
“They have been underweight Japanese real estate.” Norway’s $870 billion wealth fund is preparing to purchase properties in Tokyo after scouring Asia for investment opportunities, Karsten Kallevig, head of real estate investments at the Oslo-based fund, said March 20.
Commercial property prices in Tokyo rose 2.9 percent last year, after a 2.3 percent gain in 2013, as foreign investors, including Singapore’s sovereign wealth fund, GIC Pte, snapped up assets.
For large pension funds, “there is quite a lot of movement to make up for the shortfall” of Japanese real estate in global portfolios, Ishii said.
Land prices in Japan’s three-largest metropolitan areas gained for a second consecutive year as stimulus from the Bank of Japan pushed domestic borrowing costs to a record low and investors globally chase higher-yielding assets.
GIC paid $1.7 billion for a building in the business district, next to the Tokyo Station, in October. Blackstone Group LP agreed in November to buy GE Japan Corp.’s residential-property business for more than 190 billion yen ($1.6 billion).
“For developers in London, the idea of bringing in money from the Continent, be it France, Germany, or from the Middle East, is there at the very beginning,” said Ishii. “In Japan, the mindset has been to move money around locally.”
Investor Conference
The first MIPIM Japan real estate conference being held in Tokyo May 20 and May 21 has drawn participants from 20 countries. Ishii attended the MIPIM conference in Cannes, France, last month, a gathering of the world’s biggest property investors.
“You’ve got a resurgence of European and North American life insurance companies, who are saying Japan has got to get back on our investment list,” said Christian Mancini, chief executive officer of North East Asia at Savills Plc, a property services company.
“There is no shortage of interested capital.”
Still, Japanese real estate companies and listed real estate investment trusts are able to box overseas investors out of many transactions as they can move more quickly, know the market better, and can often obtain finance more cheaply from local banks, according to Mancini.
Cross-border investment into Japanese real estate made up about 16 percent of the total last year on deals of more than $10 million, an increase on the previous year, though still below about 25 percent seen in 2007, Mancini said.
Bubble Risk
The Topix Real Estate Index rose 1 percent today, the second-biggest gainer among industry groups in the benchmark, which retreated 0.9 percent after the BOJ’s Tankan survey showed large manufacturers see business conditions weakening.
The increase in land prices since Prime Minister Shinzo Abe came to power with the promise to end deflation has prompted Mizuho Securities Co. to urge investors to be mindful about the risk of a bubble from the BOJ’s monetary stimulus.
Investment in Japanese real estate by foreign investors more than doubled to a record 981.8 billion yen last year, according to the Tokyo-based Urban Research Institute Corp.
Ishii, who oversaw insolvency cases of Japanese financial institutions in the late 1990s at what evolved into the Financial Services Agency when a real estate bubble dating back to previous decade burst, said he is not concerned. Nationwide, land prices fell 0.3 percent last year, and have only risen twice on a year-on-year basis in two of the last 24 years.
“It’s true that in certain areas there are a lot of investors wanting to buy and we have see some very high numbers,” he said. “In a bubble, you see things with no value attract speculative bids, and that is different to what is happening right now.”
yahoo.com
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