HONG KONG – Singapore investors are heading for Japanese real estate, lured by a weaker yen and the prospect of tourism-driven growth in the second-largest metropolitan area, Osaka.
International property agent FM Investment said it has seen a fivefold increase in inquiries since Japan opened its borders in October, with Singapore investors making up about 70 per cent of 800 requests between April and June alone, followed by those from Hong Kong.
Second-quarter sales were double the volume for the whole of 2022.
The yen has fallen about 8 per cent against the Singapore dollar and Hong Kong dollar in 2023, increasing the purchasing power of property investors seeking bargains outside two of the most expensive markets in the Asia-Pacific region.
Agents say buyers are particularly attracted to Osaka, where the next World Expo will be hosted in 2025 and a multibillion casino resort is scheduled to open in 2029.
“The coming integrated resort is a real game changer,” said Mr Jason Lam, co-founder and managing director of Japan Hana Real Estate, which has offices in Hong Kong, Tokyo and Osaka.
He said sales have doubled since Japan reopened to tourists last October, and inquiries from Singapore have tripled. The World Expo, an international event held every five years, and the casino resort are expected to boost tourism and are fuelling demand for residential units and tourist accommodation, Mr Lam added.
MGM Resorts International is partnering with Japanese financial services firm Orix on the project, which will feature hotels, entertainment and conference centres and compete with Asian neighbours like Macau, South Korea and Singapore for customers.
Osaka authorities estimate the city could attract 20 million visitors a year, helping Japan hit a long-term target of drawing 60 million foreign tourists annually by 2030, Bloomberg Intelligence analyst Angela Hanlee said.
Mr Wendell Wong, who owns a Singapore-based fine wine business, bought a 14-storey bed and breakfast hotel at an “attractive price” in Shinsaibashi, a major shopping area in Osaka, in May.
He said he plans to lease the building to another bed and breakfast operator at a rental yield of 10 per cent, compared with the 6 per cent he is getting under a contract drawn up during the pandemic.
“Tokyo property prices have been overrated and much more costly than Osaka”, and operating bed and breakfast accommodation is less restrictive in the smaller city, added Mr Wong. He said he plans to build on land he owns in Namba, a commercial and entertainment district in southern Osaka.
Based on stabilised trading for a managed asset in a prime location, hotel yields in Osaka average 4 per cent to 4.5 per cent, compared with 3.5 per cent to 4 per cent in Tokyo, and 4 per cent to 5 per cent in New York, Hong Kong and London, according to Jones Lang LaSalle.
Aside from tourist accommodation, foreign investors are also buying residential property in Osaka, which has a high occupancy rate and stable rental income, said Mr Koji Naito, a research director for Japan capital markets at Jones Lang LaSalle.
Inquiries about rental housing in Osaka from overseas buyers in the first half of this year were 3.5 times higher than in the same period in 2022.
Foreign investors poured 268.7 billion yen (S$2.54 billion) into Japanese real estate in the first quarter of the year, more than double the same period in 2022, according to a Jones Lang LaSalle report.
Osaka made up 18 per cent of total foreign and local investment in the first quarter, up from 13 per cent a year earlier. The largest investment remained in Tokyo’s central five wards, at 36 per cent.
Mr Mark Phooi, a Singaporean entrepreneur in the design industry, recently bought two US$2.5 million (S$3.3 million) buildings in Osaka as he looks for passive income from rental leasing. He also predicts more return on his investment if the yen strengthens by the time he plans to sell the properties in three to four years.
But it is not just about the returns, he said.
“I also enjoy the culture and life in Japan,” said Mr Phooi. BLOOMBERG