Japan housing & real estate

Research evidence excerpt

Japan housing & real estate

erate substantial gains even if they only sell a few

properties. The new-build condominium market in greater Tokyo has also seen selling

prices per m² double between 2013 and 2025 because of the increase in land values,

construction labor costs, and building material prices, but contract signings fell by 62%

from 56,733 to 21,800 over the same period. These price increases served to offset the

decline in transaction numbers, with the result that the greater Tokyo condo market has

remained at around ¥2trn a year. Major developers have been generating high profit

levels by concentrating on the development of city-center, high-priced condos aimed at

high net worth individuals benefiting from high equity prices and other wealth effects.

Some stock market participants have voiced concerns about a decline in real estate

liquidity but the property market has remained firm. Against this backdrop, we think some

companies may increase their weighting of stable profits by shifting away from earnings

structures that are dependent on property transactions and instead strengthening real

estate leasing, real estate management, and peripheral operations. Nomura Real Estate

Holdings [3231] and Tokyo Tatemono [8804] should start to see contributions from major

central Tokyo office developments in 28/3. Hulic [3003] for its part has been investing the

proceeds of real estate sales into real estate-related businesses.

We recommend companies seeing major benefits from rising office rents and with

healthy balance sheets

Real estate turnover businesses, where companies develop properties and then sell them

at a profit, have high asset efficiency. By contrast, real estate leasing generates stable

profits but has poor asset efficiency.