Tokyo’s ultra-luxury real estate market is experiencing a surge in demand from Asia’s affluent class, particularly from China. This trend is leading some to question whether Tokyo is becoming an ‘offshore’ hub for Chinese wealth, similar to Singapore. According to the Real Estate Economic Institute’s “March New Condominium Market Trends in the Metropolitan Area,” the average price of new condominiums in the metropolitan area has exceeded 100 million yen for the first time, doubling from the previous year to 143.6 million yen.
The KITA
Bloomberg’s Lisa Du highlights the rising demand for ultra-luxury condominiums in Tokyo. She points to ‘The KITA’ in Kitasando as a prime example. This exclusive property, designed by award-winning architect Kengo Kuma, consists of only 13 units. One of the penthouse residences, complete with a rooftop infinity pool, was recently sold for around $50 million, according to its Vancouver-based developer Westbank Corp. The 507 square meter unit offers a view of the lush forest surrounding the nearby Meiji Shrine.
Mita Garden Hills
‘Mita Garden Hills’ is another ultra-luxury property that is causing a stir in the industry. Jointly developed by Mitsui Fudosan Residential and Mitsubishi Estate Residence, this condominium boasts a vast site equivalent to half of Tokyo Dome, despite its prime location in the city center.
What sets Mita Garden Hills apart from typical luxury condominiums is its location and abundant greenery. Situated in Mita, Minato Ward, close to the high-rise buildings of Roppongi, it offers a surprisingly lush green space. The site is notably large for a condominium, being the largest in Minato Ward at approximately 25,000 square meters. The residential buildings, lower than typical tower mansions at 13-14 stories, are lined up in a forest created exclusively for residents. Some of the buildings preserve and regenerate historical structures of the former Ministry of Posts and Telecommunications, adding a sense of grandeur to the property.
These properties are priced at around 20 million yen per tsubo (approximately 3.3 square meters), with an average price of around 400 million yen. According to industry insiders quoted by Du, there is a significant shortage of supply. This suggests a potential for more ultra-luxury properties to be developed in Tokyo.
The Asian Affluent Class
In addition to wealthy individuals from within Japan, major clients include affluent customers from Hong Kong, Singapore, and Taiwan. The latter group, in particular, appears to be purchasing ultra-luxury real estate with the aim of ‘diversifying their assets.’ “Many of these wealthy Asians pay in cash or take out low-interest loans from foreign banks with branches in Japan. There are hardly any regulations on foreign ownership of real estate in Japan, and with the yen weak, it’s definitely a bargain,” writes Du.
The Chinese Exodus
A significant factor influencing the market is the challenging situation in China’s real estate industry. The sector is facing a downturn, with a significant drop in condominium sales and an increase in bank loan defaults. This has led to an outflow of wealthy individuals from mainland China seeking to diversify their assets overseas.
According to advisory firm Henley & Partners, which supports wealthy individuals in emigrating and obtaining citizenship, approximately 10,800 wealthy individuals, each with an average wealth of 6 million dollars, emigrated from China in 2022. The company predicts that in 2023, the number of ultra-rich individuals emigrating will increase to 13,500, further expanding the outflow of the ultra-rich over the past decade.
Despite the Chinese government’s crackdown on overseas investment and the tightening of foreign exchange controls, Chinese investors are finding ways to move their money overseas, such as using underground banks or smuggling cash out of the country. This has led to a surge in demand for overseas real estate, including in Japan, as a way to protect their wealth.
Singapore: The Preferred Destination
In recent years, Singapore has been a preferred destination for emigration. According to Hurun, which tracks their wealth, Singapore is the top destination for Chinese billionaires considering emigration. Singapore offers low taxes, excellent schools, a thriving asset management industry, and strong cultural ties with China, with many people speaking Chinese.
Japan: A Rising Destination
Japan, particularly Tokyo, is increasingly becoming a hotspot for the ultra-rich. The country’s political stability, high standard of living, and rich cultural heritage make it an attractive option. Furthermore, the lack of legal restrictions on foreign ownership of real estate in Japan is a key factor drawing wealthy investors.
Investor eyes are turning towards Japan’s real estate market, especially in light of the downturn in China’s property sector. Japanese real estate has always held a certain allure for foreign investors. In fact, according to CBRE, a provider of commercial real estate services, foreign investors made up 30% of the approximately 4.5 trillion yen invested in domestic real estate in 2021.
The ongoing depreciation of the yen since the start of 2023 is also fuelling this trend. The dollar-yen exchange rate has moved from 130.73 yen at the close of January 2nd to 144.45 yen as of July 4th, making Japanese real estate even more attractive to foreign investors.
Conclusion
The trend of Tokyo’s ultra-luxury real estate attracting Asia’s wealthy is a fascinating development in the global real estate market. As Tokyo continues to establish itself as a hub for foreign wealth, we may see further transformations in the city’s real estate landscape. Whether Tokyo will follow in Singapore’s footsteps and become an ‘offshore’ hub for Chinese wealth remains to be seen.
