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Japan property investment logs 1st fall in 4 years

TOKYO -- Property investment in Japan shrank 23% on the year to 4.08 trillion yen ($37.81 billion) in fiscal 2015, for the first contraction in four years, according to Urban Research Institute, which is affiliated with Mizuho Trust & Banking.

     The number of transactions also decreased for the first time over the same period, sliding 19% to 1,014. Urban Research compiled the figures based on data released by listed companies and real estate investment funds.

     Growing risk-aversion among overseas funds and other investors fueled the slowdown, said the research institute.

     Japan's hitherto active property market is witnessing a mix of bullish and bearish sentiment amid uncertainty over the country's economic outlook.

     Foreign investors were especially cautious about Japanese properties. Although land prices have remained at high levels, rents -- which reflect actual demand in the market -- have yet to return to their level before the 2008 Lehman Brothers collapse, mainly because tenants in office buildings are wary about Japan's economic outlook.

     Rental yields, a measure of return on investment, stand at around 3% even for high-grade properties in central Tokyo, falling short of the 5% generally sought by foreign investment funds. Lower yields indicate higher purchase prices.

     Property transactions by foreign concerns fell by half to 543.1 billion yen, and the number of deals plunged to 29 from 97.

     The investment slowdown began in earnest last summer, when China's stock market went into a tailspin.

     Falling property investment yields, coupled with weak stock prices and low interest rates, have investors struggling to find attractive destinations for their money.

(Nikkei)

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