In its latest research report TIAA Henderson Real Estate (TH Real Estate) has investigated Japan’s invest-ability for long-term real estate investors from a demographic perspective.
Japan has been a world leader in the global mega-trend of demographic change, it reported, characterised by an ageing population. This, it said, will lead to a decline of the total population, which has not previously been experienced by an economy in the absence of a major disaster.
TH Real Estate pointed out that, given that large parts of the developed world will go through a similar demographic phase as Japan the in future, Japan may serve as a useful indicator for what to expect from real estate returns going forward elsewhere.
With its global market analysis focused on cities instead of countries, TH Real Estate highlighted the importance of looking beyond the national picture in the case of a factor, such as demographics.
Analysis within the report highlighted the stark differences in the demographic trajectories between the main Japanese cities. Tokyo (pictured), for example, is predicted to stay perpetually younger than the rest of the country.
The report concluded that real estate investors will have to brace themselves for the long-term relative decline of rental values to continue across most cities, with a considered investment focus on those cities that are demographically stronger.
Stefan Wundrak, Head of European Research, said: “In the short run, all eyes will be on the next steps of Abenomics, in particular, the so-called ‘third arrow’, targeting some of Japan’s supply-side structural problems.
“Some attempts have been made to address the demographic challenges, but in general, Japan is dealing with it, with more complacency than some European countries.”
TIAA Henderson Real Estate is an established investment management company with specialisation in real estate equity and debt investing worldwide, and is one of the largest real estate managers in the world.
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
