Real estate investment in Japan
Japan has a large real estate market that is considered stable and mature. Low interest rates and a weak yen have contributed to an increase in real estate investment over the past decade, and property and land prices have been on the rise. As there are no restrictions on foreign real estate ownership, Japan is also a popular destination for overseas investors, from wealthy individuals looking to buy luxurious second homes to institutional investors in search of high returns.There are several ways to invest in real estate. Investors may purchase properties directly and potentially benefit from an increase in value over time or a cash flow from rental income. Alternatively, securitization schemes offer the option to invest indirectly by buying shares in real estate investment vehicles. Japan’s real estate securitization market was estimated at around 46.8 trillion Japanese yen at the end of the fiscal year 2021. One type of investment scheme that falls under this category is real estate investment trusts (REITs).
The Japanese REIT market
With a market capitalization of around 15 trillion yen in December 2022, Japan boasts one of the largest REIT markets in the world. REITs are investment vehicles that pool money from investors to acquire income-producing real estate and distribute at least 90 percent of their earnings to shareholders. While REITs originated in the United States in the 1960s, Japan’s REIT market was established in 2001 after reforms in Japan’s investment trust system, and since then has gradually expanded.In 2022, around 61 Japanese REITs were listed in Japan. They held over 4.5 thousand properties, with assets under management amounting to around 21.9 trillion yen. In addition to publicly traded REITs, termed J-REITs, there is a growing number of privately placed REITs. Japan’s private real estate fund market, which is primarily aimed at institutional investors, was estimated at 29.7 trillion yen in 2022. REITs invest in different properties, ranging from apartment complexes to offices and logistics facilities. Based on acquisition value, offices were the dominating property type in the portfolio of private and listed REITs.
