Japanese Property Market Quarterly Review, Second Quarter 2013 -Steady Property Market with Economic Recovery-

Kazumasa Takeuchi

■Summary

Japan’s GDP grew by 1% q-o-q equivalent to annual 4.1% in the first quarter of 2013. Both domestic and foreign economic factors are improving, although the equity and foreign exchange markets have run out of steam since May. Housing starts recovered the volume equivalent to annual one million units for the first time in four and a half years in May. New condominium sales are expected to remain steady for a while, supported by the economic recovery, rush demand before consumption tax raise, expectation of property price increase and interest rate rise.
Tokyo grade-A office rents declined by 3.9% q-o-q in the second quarter following a 15.8% surge in the first quarter, while office rents of large sized category rose continuously. Tokyo office rents are forecasted to continue rising until the first quarter of 2014. Foreign visitor arrivals grew strongly by 31.9% y-o-y in May on the back of JPY depreciation and flight additions. Then, hotel occupancy rates remained as high as those before the global financial crisis in 2008. Luxury residential occupancy rates improved significantly.
J-REITs acquired sizable assets totaling JPY 1.4 trillion in the first half, which is already 1.7 times as large as the total amount of last year. Foreign investors have become active again with the JPY depreciation and economic recovery. If Tokyo wins the 2020 Summer Olympic Games at the 125th IOC session in September, domestic consumption and investment could be more active in the medium term.