Being a Japanese home owner has been a disappointing experience beginning in the late 1980s, when land values collapsed, and in the subsequent decades, when they have stubbornly failed to recover. But all that may be about to change. The Wall Street Journal reports that Japan's property market might be about stir back to life. It's a sign of how terrible things have been that the WSJ sees it as a hopeful sign that land values fell only 1.8% in 2012, the slowest pace of decline since 2008.
The Tokyo Stock Exchange REIT index has risen by a fifth in three months on expectations that real estate trusts will push up profits from rent increases. The higher REIT share prices rise, the easier it is for them to raise money from selling new shares - money to plough into more properties.
Japan's public real estate trusts have raised over $1.8 billion in cash so far this year, almost 70 percent of the total they raised in the whole of last year, according to Thomson Reuters data. That aggressive fund raising is a sign that REITs will be strong potential buyers, experts said.
Nippon Building Fund, Japan's largest REIT by assets and the buyer of a 60 percent interest in the Sony building, raised about 70 billion yen in January from selling new shares. Kenichi Tanaka, CEO at Nippon Building Fund Management, which manages the REIT, said then the trust could afford to buy assets worth 100 billion yen, and was keen to invest quickly as now is a good time to buy properties in Tokyo.
Japan's government plans to boost the amount of the residential mortgage tax credit from 2014 through 2018 in order to stimulate the overall economy andto offset a rise in the consumption tax rate in April 2014. While a well-timed tax incentive may offset the short-term negative impact of a consumption tax increase, government programs may prove more effective in the long term.