Relations between China and Japan might be tense, Chinese companies and individuals spend increasingly their capital in the real estate of Tokyo, writes WSJ wealth editor Wei Gu in her column at the Wall Street Journal.
So far this year, Chinese individuals and companies have bought almost $230 million in commercial real estate, more than triple the amount from last year, according to data from Jones Lang LaSalle.
British luxury property developer Grosvenor Ltd., owned by the family trust of the Duke of Westminster, is betting the influx of rich Chinese investors will help boost demand for its refurbished apartments in Tokyo’s upscale Roppongi area.
“One upside scenario for Japan is its relationship with China,” said Nicholas Loup, chief executive of Grosvenor Asia. “There are huge amounts of money flows between both countries. That’s currently below people’s radar screen.”
The Japanese currency has fallen 25% against the yuan over the past five years, outstripping its 15% fall against the U.S. dollar in the same period.
Chinese tourist arrivals in Japan hit a record high this year, partly due to the weak yen, spurring investment in vacation homes. Japan has emerged as the most desired travel destination for Chinese this year, according to Travelzoo Asia Pacific. There’s also talk about making it easier for Chinese to apply for multiple-entry visas, which would further spur interest.
Rich Chinese are among the biggest foreign buyers in New York and Sydney. But other formerly popular investment destinations like Hong Kong and Singapore are becoming more costly due to taxes on nonresidents. In Hong Kong, Chinese buying is one reason real-estate prices have soared, causing social frictions with local residents.
Foreign buyers see value in Japan. On a square-foot basis, Tokyo property prices in U.S. dollar terms are about half of the levels of comparable areas in Hong Kong, and similar to prices in Beijing and Shanghai. Rental yield can be as high as 6%, compared with 3% in Hong Kong, and about 1% in Beijing.