Vic,
Though
some figures are beginning to show positive #s.
I
am not very fond of REIT in Japan.
Following
are some of my reasons
1. The birth rate is significantly down. ie less buyer vs more supplier
in
the future.
2. ever loss making national social security and
corp pension fund schemes
are under revision.
i.e. : not much support can be expected
after retirement, making
people cautious on big commitment such as
30 yrs mortgage for real estate.
this is the part of the reason for recent
slow economy.
3. not value for money comparison to other
countries.
eg
for us$300k I can only buy 500sq feet small mansion in Tokyo where
with the same amount, I can buy 1000 sq ft
condo with swimming in Singapore.
if in Malaysia, the size will be triple of
Singapore.
4.
significant economic growth cannot be expected in Japan as Japan have already
reached matured stage. generally real estate appreciate in
booming economy. late 80s in Japan. mid 90s in SE Asia and 00s in
china.
(I think china real estate market is a little
over heat in some area.
too many buyers are going for speculative
purpose.)
I hear US real estate appreciated
significantly around 00s but I think
that is due to the heat in investment boom,
especially huge appreciation in
stock market.
regards
to you question, I think the investment return is depending where the
investment is made. I have attached a file
page
1 graph 1 shows relative land price change in % comparison
to previous year.
dot
line ... land price for residential estate
blue
line ... commercial land price.
black
line ... average of above 2
as
we can see even last year 2003, the price was at down trend.
page
1 graph 2 shows the land price change in 3 major cities including Tokyo.
the
depreciation rate is down but still down.
notice the Y axis is
different
scale
from graph 1.
manufacturing
companies are shifting their factories to overseas especially china and I
believe this trend will continue for sometime.
Never
to invest in suburb. Unlike western,
Asian people love to live
in
cities. if you are investing real
estate in Asia, investing in city
area
increase
the chance of positive return.
page
1 graph 3 shows the land price change in country side. pure disaster. especially for commercial land (factory etc).
page
3 graph 1.1 shows the land price level
in each prefecture. one significantly higher than others is Tokyo land price.
page
4 graph 2 shows land profit margin for whole of Japan. page 4 graph 2 shows
land profit margin for 6 major cities. (data only available up to 2001)
blue
line ... ROA (operating income / asset value)
green
dot line ... land price appreciation/depreciation %
black
line ... jpn bond interest rate
brown
line ... ROA + Land price change
Page
5 graph 1 shows REIT interest rate vs. weight (distribution) The data is old
2001 so you can ignore but
blue
line ... 5 major cities
brown
line ... suburb Kanko area (suburb of Tokyo).
black
dot line ... suburb of Osaka.
>From
the standard distribution point suburb seems better return but
Page
5 graph 2 land price level comparison to previous year shows Kanto suburb
depreciated more than 5 major cities. suburb of Osaka did not depreciate
much. may be price is already low.
paper
6 shows interesting scatter graphs.
1.
Tokyo
2.
Osaka
3.
Yokohama
4. chiba
x
axis Land price/ M sq
y
axis % in change from previous year
blue
dots .... 2003
green
triangle ... 2002.
what
we can see is
1.
only certain part of Tokyo appreciated.
2.
especially in expensive part of Tokyo.
it
is true that despite sour real estate market, some companies manage to
redevelop and run profitable projects.
eg mori building corp., redeveloped Roppongi
Mori
blds corp. http://www.mori.co.jp/
mitsubishi
real estate at Maru bldg in front of Tokyo station.
last
graphs are page 8.
graphs
show mansion profitability.
Income
return .... red dot line
Capital
return .... blue line
Total
return ... black line
1.
Tokyo 2. kanagawa
3. saitama 4. chiba
from
these graphs, we can say average return is 5%.
but
as I say, due to less birth rate, I am not investing in real estate for long
term. (for short term, it is ok as
population is still high.)
occlusion
of my opinion.
1.
if the developer invested in central cities good location,
return may be good. annual 3-5%?
(but are you satisfied with 3% return ? I think yen is at high side
and exchange fluctuates bigger than
investment return.)
2.
I have attached 2 years charts for japans real estate companies.
they seem all the factors have already factored
in.
ROE is around 40 times. not good time to get in.
3.
slight uptick in rent does unlikely to continue.
certainly I cannot foresee pro late 80s to
be back.
I
don’t want to influence your decision making as I have changed my residence 20
times in the past that I tend to see real estate
as
consumable. (I only buy for the sake
living, not investment return.)
any
question, please let me know. good
luck.
shui
See
Referenced Graphs here (109 KB PDF May require Japanses Fonts)