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Report: Japan property investment shrank 23 percent in 2015

For the first time in four years, real estate investment in Japan contracted, according to data released by the Urban Research Institute.

Property investment volumes in Japan witnessed a contraction in the fiscal year 2015, the first time in four years, according to a report by the Tokyo-based real estate research and consultancy firm Urban Research Report.

The total investment in the country’s property sector was estimated to be ¥4.08 trillion (€32.9 billion; $37.3 billion) last year, down 23 percent in comparison to 2014, according to an article in the Nikkei on the report (in Japanese). The number of deals also reduced to 1,014 completed, down 19 percent from the year prior.

The report shows muted interest by both domestic and foreign investors. The volume of property investments by foreign investors dropped to ¥543.1 billion, down by almost 50 percent while the number of deals reduced to 29 from 97.

According to property advisors, macro policy changes, particularly the adoption of negative interest rates since the start of this year, have altered the investment sentiment in the market.

Nicholas Wilson, associate director, capital markets for JLL, said there has been greater emphasis on debt deals than equity deals in Japan.

“Deals are still happening but right now they are more in the debt space as investors are able to generate higher returns and improve their equity multiples due to the ability to refinance,” he said.

On the subdued foreign investor presence in the market, he said there has been a lot of interest but not a lot of execution because there haven’t been too many large-scale properties coming on to the market.

JLL’s preliminary data on global capital flows released last week points toward a decline in real estate investment volumes in Japan in the first quarter of this year as well. According to the findings, real estate investment in the entire Asia Pacific region touched $21 billion, 16 percent lower than the same period a year ago.