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Japan Property Ups/Downs - Other Factors

October 1, 2008

Analysis of:Ups and downs on Japan's property ladder | search.japantimes.co.jp

To some extent foreign investment drove up and will pull down values. There are other factors. Loose lending standards by Japanese banks of 80-90% LTV are now 50-70%. Mezzanine lending was generally provided by foreign institutions. After sub-prime started in the USA, intermediate finance seized-up in Japan from late 2007. Land Aggregators, Developers, Funds and REITS lost site of yield and focussed on capital appreciation after 5+ years of upward movement. A spate of bankruptcies and asset fire sales are inevitable during 2008-2009. Major cities office markets over supplied until 2013 Condo developers saw land, labor & material prices rise pricing buyers out of the market. Rents and land prices rose too rapidly and now must stagnate or fall for some time. Condo over-supply may impact some residential rents/vacancy. A further confirmation of this fin de siécle is that the Japanese macro economic expansion which began in 2002 has/will clearly come to and end at some point in 2008.

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