Japan’s Flat Terrain

(Japan property market: annual headline returns)

Source: IPD


By Max Arkey

The total return for Japanese real estate investments was 3.9 percent in the year through the third quarter of 2012, according to the latest figures from IPD Japan. This total return combined an income return of 5.2 percent with a capital return of minus 1.3 percent. Compared to a year earlier, the year-over-year total return has improved by 0.6 percentage points. Income return is slightly down, but the rate at which capital values are falling has slowed from minus 1.9 percent a year ago.

In the year to September, apartments were the best performing of the three main sectors, with a total return of 6.4 percent, followed by retail at 5.7 percent. The office sector had the worst performance, with a year-over-year return of 2.2 percent and a capital decline of minus 2.5 percent. In recent months, the retail sector has shown the greatest improvement, followed by apartments. Office values have been broadly stable over the past 12 months.

In a year-on-year comparison, the direct real estate return of 3.9 percent lagged the performance of J-REITs at 16.4 percent in the year to September. J-REIT returns have continued to increase in subsequent months. Real estate outperformed government bonds (3.8 percent) and equities (minus 0.6 percent) in the year to September, but by December Japanese equities had recovered significantly (21.8 percent).

—Max Arkey is a senior manager for IPD North America.