TOKYO -- Chinese interest in Japanese property surged at the beginning of the year as the intensifying trade war and Beijing's tighter capital controls combined to cool demand for U.S. real estate.
According to Juwai.com, China's top international real estate website, Chinese inquiries regarding Japan rose 13 times on the year in the first three months of 2019. Interest in U.S. properties, on the other hand, dropped 27.5% in the first three months of this year.
Property investment is still the main driver of increased inquiries, but residential buyers are also on the rise as Japan eases immigration rules for Chinese tourists and executives, Juwai.com said. The company, based in Shanghai and Hong Kong, deals mainly with families and individual investors in China.
"Could Tokyo become the next Vancouver? It is possible, but probably not this year," said Carrie Law, CEO of Juwai.com. The Canadian city is known for its large Chinese population, especially immigrants from Hong Kong following the region's handover to China in 1997. "It's true that more Chinese are taking up the Japanese visa programs that have been loosened to appeal to them. We see rapid growth in Chinese buying and visa uptake, [though] this is not yet happening on the scale that you have seen in Canada over the past half-decade."
Japanese properties now in demand include those in ordinary residential areas in Tokyo and Osaka, with buyers looking for a second-home or an apartment to house children studying in Japan. The most common budgets are between $200,000-$600,000, according to one agent. Many also choose to rent out their properties.
Osaka-based realtor Mizukawa reported a 15% increase in transactions made by Chinese buyers in January-March compare to the same period a year ago. "Chinese buyers' growing interest in Japanese homes stems from worries about the yuan's depreciation and their recognition of the growth potential of Japan's home values and economy," the company said.
Another realtor, Century 21 Culture Center, reported a 60% jump on the year in transactions by Chinese buyers, including those from Hong Kong and Macao, in October-December. Chinese buyers typically invest between 50 million yen and 200 million yen, the Hong Kong-based realtor said.
There is no official data in Japan tracking residential investment by private individuals, either foreign nationals or Japanese citizens.
Interest in Japanese property started rising sharply in the second half of 2018, roughly around the time that trade tensions between Beijing and Washington intensified. While inquiries do not translate to a one-for-one increase in transactions, they serve as a useful proxy for eventual demand, Juwai.com said.
This is not the first time Japan has seen a surge in Chinese demand. Before Beijing clamped down on overseas investment in 2017 in a bid to defend its currency and reduce reckless investment, Japan experienced a boom in speculative property buying by Chinese investors. This was mainly around sites for the proposed 2020 Olympics in eastern Tokyo, the high-end Tokyo residential districts of Azabu and Hiroo, and ski resorts in Hokkaido, according to Japanese property agents. Many of those properties were sold for millions of dollars each.
This time around, Chinese investors are eyeing a property boom in the runup to the 2025 World Expo in Osaka and the opening of the country's first casino in the same region. According to Juwai.com, 77% of buyers are purchasing for investment.
Visas are another factor, according to Century 21 Culture Center. "It is still difficult to obtain a residency visa in Japan, so Chinese people invest in property and do business [here] instead." Those businesses include running tourist agencies and restaurants, renting property and exporting cosmetics and other high-quality Japanese goods to China.
While obtaining residency can be a challenge, Tokyo has made visiting the country easier. In 2017, the Japanese government introduced a multiple-entry visa program for Chinese citizens. These visas are valid for five years and allow holders to stay in the country up to 90 days at a time, but not more than 180 days a year. The program is open to people with midrange incomes, not just high net-worth individuals.
The spike in real estate interest comes as returns on Chinese property and other domestic investments continue to disappoint local investors and, unlike other Asian countries, there are few restrictions on foreigners buying property in Japan.
"Since early 2017, capital controls have made expensive, new overseas investment increasingly difficult for Chinese buyers," Juwai.com's Law said. These buyers are retreating from higher-priced markets, such as the coastal U.S. and Australia. "Some Chinese are selling their earlier investments in other countries and using the money to buy in Japan. Others have decided that an inexpensive Japanese apartment is easier to afford and manage than a home in California or New York."
Education is another factor potentially influencing property trends. Since the outbreak of the trade war between Washington and Beijing last year, many Chinese have had difficulty obtaining visas for studying at U.S. colleges. As a result, they are turning to other countries for higher education -- including Japan.
The rising number of mainland Chinese tourists visiting Japan -- up 14% to 8.4 million last year -- has also helped buyers from China become more familiar with the country and more comfortable acquiring assets in Japan.
"Many Chinese consider Japan a model for their own country to aspire to in terms of quality of life," Law said. "When they visit, they fall in love and often want to purchase a home here."
Japan's property market has reawakened in recent years after more than two decades of decline. Still, land prices nationwide remain at only 38% of the peak in 1991.
Real estate is the favored means of investment for many Chinese, given the generally low interest rates and the struggling stock market in China.
Japanese properties yield around 5%, often making them more attractive investments than in China, where yields for apartment rental reach only about 2.6%, according to Juwai.com. Yields in Hong Kong and Singapore -- traditional destinations for Chinese offshore investment -- are not much better.
"While most Westerners still believe Japanese property is hugely expensive, it can feel like a bargain to Chinese buyers," Law said.