TOKYO -- Many overseas investors have slammed the brakes on property purchases in Japan as real estate prices rise.
Between January and September this year, foreign investors sold 595 billion yen ($5.72 billion) more in Japanese properties than they bought, according to the Urban Research Institute of Mizuho Financial Group, which compiled data from real estate companies and institutional investors.
The tally by far beats the previous record of 330.1 billion in the same period of 2013. The full-year figure likely will reach a new high, too. A plunge in purchases is largely to blame. Total purchases for the nine-month period plummeted 80% on the year to 130.2 billion yen, the lowest since 2012.
The head of the research institute, Shigeo Hirayama, sees price increases -- and the stronger yen making real estate even more expensive -- as the culprits. In central Tokyo, prices of large office buildings have risen about 20% in four years.
Under such conditions, investors turn to profit-taking. Sales for the period came to 725.2 billion yen.
Bernie McNamara, in charge of real estate management at J.P. Morgan Asset Management, says the booming Japanese property market is about to end. He says the company is reducing high-risk holdings and narrowing its focus to high-performance properties held over the long term.
On the other hand, domestic real estate investment trusts are active buyers. Regional banks struggling to generate returns on bonds amid ultralow interest rates are stepping up property investments, including REITs. The Bank of Japan's buying is bolstering REIT prices, spurring new share issues to increase capital.
Still, an overall decrease in transactions is alarming, as it could slam the brakes on the market. Between January and September, transactions totaled 2.79 trillion yen, according to real estate firm Jones Lang LaSalle. Foreign investors have lost their appetite for properties in Japan, and there are not enough buyers to absorb the new supply.
Individual investors from abroad are also more stringent on their selection in light of rising prices, although investment demand for bargain condominiums remains strong, says a staffer of a Taiwanese real estate brokerage operating in Japan.