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Saturday, March 12, 2011
Chinese take to Tokyo property market
Individual investors snatching up condominiums to protect assets
Mao Yishu, a 28-year-old student, persuaded his parents in Shanghai to buy a roughly 20-sq.-meter condominium in Kichijoji, a popular part of the western Tokyo suburb of Musashino, because it will be more economical than renting if he stays in Japan for a long time.
"It's better to buy than rent, isn't it?" asked Mao, who is studying information technology at a vocational school in the area, showing his projections for rent for 10 more years.
His parents bought the condominium in January. "I'm their only child. What else can they do than let me do what I'm eager to do?" Mao asked.
China's drastic economic growth has prompted an increasing number of wealthy Chinese to cast their eyes on the Tokyo property market.
Many are investing in Japanese properties to diversify their assets. While land prices have skyrocketed in Beijing, Shanghai and Hong Kong, prices in Japan have hit bottom.
They are also buying properties because they want to live in them, use them for business trips or invest in their children's education, unlike Chinese businesses that are buying up properties at Hokkaido ski resorts or rural hot springs purely for investment purposes, industry insiders said.
"In many cases, those who plan to buy Japanese real estate have special feelings about Japan," said Michihiro Abe, vice president of Tokyo- and Shanghai-based China Investment Management Inc., which runs a tourism information service called Japan Window that also offers real estate services catering to Chinese.
Abe said individual buyers often have experience working, studying or traveling in Japan, or working at Chinese units of Japanese companies.
In Mao's case, a fascination with Japanese game consoles as a child led him to major in business and Japanese at a university in China. He then worked at a local unit of a Japanese chemical maker for two years.
"I wanted to learn more about Japan," he said, explaining why he came to Tokyo two years ago.
The number of Chinese tourists coming to Japan has more than tripled in the past seven years, hitting a record high 1.4 million in 2010, according to recent data by the Japan Tourism Agency.
Economists expect this number to climb further since restrictions on tourist visas for Chinese individuals were loosened last July.
Some real estate agents now offer condominium tours for wealthy Chinese interested in investing in central Tokyo.
"About 50 of our units have been sold for Chinese and Taiwanese individuals since last July," said Hiroshi Mori, manager in charge of corporate planning at Daikyo Inc., which has handled more than 300,000 Lion's Mansion condominiums across the country.
Daikyo expects to be signing 300 contracts annually within a few years, mostly with wealthy Chinese families, Mori said.
Many are interested in well-known areas, including Shinjuku, Shinagawa and trendy Azabu, where properties can earn high rent or be sold off easily when they go home, according to Daikyo.
Others are interested in buying small apartments in Bunkyo Ward, home of the University of Tokyo, hoping to send their kids to the university some day, the company said.
The diplomatic fallout from last September's run-in between a Chinese trawler and the Japan Coast Guard hasn't had much impact on overall demand, industry experts said.
This is because Chinese investors are being driven by a desire to protect their assets.
"Those who make a fortune doing business are thinking about taking steps to avoid risk," Abe of China Investment Management said.
He said the fear of losing a fortune is particularly strong among Chinese in their 40s who are experiencing a booming economy but who also have childhood memories of the Cultural Revolution in the 1970s, in which many capitalists were purged.
"We all don't know what is going to happen in China," Abe said.
In China, people do not have property rights. They only have the right to use real estate for several decades before returning it to the government, which makes it difficult to pass assets on to future generations.
In contrast with many other countries, Japan's lack of restrictions on foreign ownership of land is attracting non-Japanese investors, experts said.
Daikyo's Mori said the outlook for demand from Chinese individuals looks rosy, but the market for Japanese buyers is in a lull.
"We are expecting significant demand from wealthy Chinese people," he said.