38 ASIAN LEGAL BUSINESS – DECEMBER 2023 WWW.LEGALBUSINESSONLINE.COM REAL ESTATE Investments into Japan’s property sector have been garnering increased attention from global investors in the past year, as stable regulatory conditions and a loose monetary policy provide a window of opportunity to capitalise on the country’s declining currency value and low-interest rates. The Bank of Japan’s Financial Systems Report for October said that real estate-related loans have continued to increase amid the rebalancing of private debt and economic activity. The report also found that foreign investors are driving an increase in funding demand in the country’s real estate transactions market. Total foreign investments in Japanese real estate climbed by 45 percent in the first half of 2023, led by substantial investments from institutional investors, private equity firms, sovereign wealth funds and corporations, a CBRE report found. This significant rise in interest among global investors is not simply a “right place at the right time” moment for Japan. A combination of monetary and regulatory decisions has put Japan on the cusp of a real estate boom and a fiercely competitive market that could bring a lot more work for the country’s legal advisors in the near future. Theo Seltzer, a partner in U.S. law firm Morrison Foerster’s Tokyo-based real estate team, summarises the main reasons for this rise. “The key factors driving the surge in foreign investments in Japan’s real estate market in the past year include a weak yen as compared to other currencies, particularly the U.S. dollar; Japan interest rates remaining very low as compared to other jurisdictions as the Bank of Japan has not followed other central banks in a steep rise in interest rates, which allows investors to obtain a positive leverage; Japan banks still welcoming new business; Japan being a stable, rule-of-law country, making it attractive in a time of general global concerns; and Japan – in particular the large cities – having a large pool of investible high-quality real estate assets.” Gerald Fujii, a partner at Withers’ Tokyo office, also points out that years of Japanese experience and sophistication in foreign investments provides an ideal and seamless platform for increased global capital to pour into the nation. “Other factors include the fact that Japan is a sophisticated market that is well-served by high-quality managers, lawyers, tax advisors and other real estate professionals who have many years of experience providing services to foreign investors,” says Fujii. BY NIMITT DIXIT A weaker yen, attractive interest rates and increasing consumer demand spurred by post-COVID market re-opening has made Japan’s real estate market one of the hottest Asian investment options for global investors in 2023. This is keeping real estate lawyers extremely busy. LAND OF RISING REAL ESTATE Image: saiko3p/Shutterstock.com
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