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Real estate investment is currently attracting attention, with soaring prices for condominiums in city centres due to the dramatic changes in working methods and lifestyles following the coronation.
Let us now explore what the key points are for actually starting a property investment.
The Corona disaster has changed people's lifestyles and ways of working, and the real estate situation is also changing. In the city centre, demand for flats for single people has decreased as teleworking and remote working has taken root, and demand for family-type rental properties of around two bedrooms is increasing.
According to a real estate official, family-type rental properties are filling up quickly when they become vacant. This is due to the phenomenon of couples with both parents working and raising children moving to detached houses or to the suburbs due to changes in working patterns, and demand for more spacious accommodation in rental housing is also increasing.
In contrast, demand for office space has been declining. This is because the spread of telework in the Corona disaster has reduced the need to go to the office, and spacious offices are no longer required.
However, the completion of large new buildings in central Tokyo is expected to continue after 2024, and if the supply of office space increases, new vacancies will be created, further worsening the supply-demand balance in the rental office market. One of the reasons for the sluggish growth in future office demand
This will be one of the factors that will cause the future demand for office space to stagnate.
In addition, the Corona disaster caused not only workers but also companies themselves to relocate from the city centre in many cases, and this trend is likely to increase in the future, making it difficult to realistically expect office demand to return to pre-Corona levels. The above is the real estate situation in the city centre after the Corona disaster.
What about the real estate situation in rural and suburban areas? According to those involved in real estate, the current trend in Japan towards urban concentration is growing stronger year by year, so demand in the suburbs, which are further away from urban areas, is not rising as much as it could.
Prices for suburban property after 2023, following the Corona disaster, are also expected to increase slightly or remain unchanged.
This is also reflected in the Real Estate Day Questionnaire (February 2022) conducted by the National Federation of Building Lots and Building Trades Associations, which showed that only 2.8% of respondents changed their residence due to the new corona virus. This shows that the need to move to the suburbs is not so strong in the face of the corona disaster.
As for real estate in rural areas, the report states that, unlike urban and suburban areas, there is a possibility of a fall in prices here.
This is because Japan has a rapidly ageing population, the number of vacant properties in rural areas is increasing due to the death of landlords, there is an oversupply of real estate in rural areas, and the population continues to be concentrated in the Tokyo metropolitan area, so there are few factors that would cause real estate prices in rural areas to rise. The report states that, on the contrary, a fall in prices due to a fall in demand is more likely.
Of course, even in rural areas, land prices are rising in urban areas, but even so, in rural areas as a whole, prices continue to fall the further you get away from urban areas.
Demand for real estate is on the rise, with unprecedented price rises, particularly for condominiums, apparently reflecting urban trends.
Thus, from the perspective of property investment based on current property trends, it is expected that in urban areas, rental housing with a high occupancy rate will be built in the future with a mix of family-type layouts, so if you are considering investment, properties that take the current situation into account will be a good target.
There are many different ways to invest in property.
Since the ‘property investment boom’ of around 2016, when the amount of loans for investment property purchases increased, various factors have come into play, including the Bank of Japan's negative interest rate policy, which has made it easier for individual landlords to obtain loans, concerns about asset building and public pensions in retirement, increased corporate property investment, and the prospect of inbound demand. The range of real estate investment has expanded due to a variety of factors, including the prospect of inbound demand, and various investment methods have been developed to date.
Typical examples include investment in condominiums, whole buildings, detached houses, real estate investment trusts (J-REITs), private accommodation and parking lots.
The classic types of investment, such as investing in a whole building (owning an entire condominium or flat), investing in a detached house (renting a detached house) and investing in a condominium unit (owning a room in a flat), probably need no further explanation.
Whether these investment methods are effective or not depends on the individual's investment budget and the size of the investment, and each investment method has its own advantages and disadvantages, so it is difficult to generalise.
J-REITs have attracted attention in recent years, but real estate investment trusts are one of the same investment instruments as stocks. In other words, they collect funds from investors to purchase a number of properties, such as office buildings, commercial facilities and condominiums, and distribute the rental income and trading profits to investors.
Investment trusts may not be strictly speaking real estate investments, as they do not allow investors to hold real estate as their own assets, but they are attracting attention as part of real estate investment, as investment trusts are attracting attention from the perspective of risk hedging diversification.
On the other hand, there are certainly many pitfalls in property investment. Unless you have a good knowledge and insight into the purchase of property, you will most likely have to ask a specialist property investment agent to help you.
This can lead to the well-publicised ‘pumpkin carriage’ incident at Suruga Bank. Therefore, it is important to make a decision on whether or not to invest in property based on sufficient research by a real estate agent, the domestic situation and the economic climate.
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