China’s Japanese property purchase redux: Resuming at top speed

TOKYO, Oct. 24, 2023—It started quietly to the Japanese singer-songwriter group Alice’s romantic tunes evoking snow-white rolling hills and European Alps-like ski resorts of Hokkaido. The first arrivals were New Zealand and Australian skiing zealots that fell in love with Niseko’s powder snow. Rich Chinese began following two decades later, shortly before the 2019 Covid-19 pandemic, to Asia’s most coveted snow paradise, wooed by Alice’s late Shinji Tanimura’s songs and impressed by the nature’s untainted beauty and geographical proximity to their home country, and they later spread out to Furano and other parts of the northernmost Japanese island, buying properties at prices unimaginably high for locals.

During the Japanese pandemic lockdown that lasted through the first half of 2023, the Chinese appetite for Hokkaido properties remained intact, albeit muted, as they had to close deals on-line through Japan-resident Chinese intermediaries. The three-year-respite, however, gave them time for extensive research of the Japanese real estimate market, notably that it’s an industry where hardly any legal, zoning and societal restrictions on foreigners’ acquisitions exist. So, midway through the pandemic period, their eyes lit up to purchase Kyoto properties where Japanese owners have to struggle for passing properties onto their folks as the country’s population contracts and birth rates shrinks.

In the late 2000s to early 2010, Chinese investors’s interest was areas relatively close to the airport and the Hokkaido capital of Sapporo. Nitori Co., a Japanese equivalent of now-defunct Bed Bath and Beyond, was developing a large second home village near the airport, and that drew one of the first phase of Chinese acquisition of Hokkaido properties, according to media reports.

In 2022, affluent-looking Chinese who probably made fortunes in information technology products and services landed at New Chitose Airport and other Hokkaido destinations not in large group tours as before, which were still under Covid-19 travel bans, but in small groups that were permitted by the Japanese quarantine. They spread out to many Hokkaido destinations, including Yubari City, which went bankrupt several years ago. The city office sold a property and made an open-ended free lease of a vast tract of land to Japan-resident Chinese.

The city also transferred the title of Yubari Resort Co. to another Chinese investor, according to the media reports.

Niseko, one of the first-phase Chinese investment target, and neighboring Kucchan town are becoming even hotter than before the pandemic. A total of more than 200 ball-park size equivalent land tracts there are in foreign ownership. The public value (assessed by the Japanese government) of land there soared nearly 6-fold, the rise triggered substantially by the influx of money from China via Singapore, a town official told me recently.

The fresh money is no doubt triggered by the yen’s near 50 pct drop against the U.S. dollar and other currencies as it, from overseas’ perspectives, mean a sharp discount of Japanese properties. The town official feared that more foreign money may come in, fanning inflation that’s already causing havoc to local residents.

Other cities

From the late 2000s, Chinese investors have been buying Kyoto hotels and inns. There are now real estate brokers advertising available facilities to potential investors. Now, Chinese investments are focused on ‘Machiya,’ which are townhouse-like two-story wooded houses lived for centuries by local people. Those houses are being snatched up at unusually high prices making Kyoto unaffordable place to live for ordinary people. This indicates that supply of hotels and inns for Chinese acquisitions are being dried up.

Recent Japanese government statistics underscored the impact of aggressive Chinese investment into the Japanese property market. Tokyo, Osaka, Nagoya, Kyoto, Sapporo and other big cities registered sharp property price increases.

As the Kyoto property market conditions tighten among key urban areas, Chinese seem to be refocusing on Tokyo, the city of 12 million that offers much bigger availability. A media report said that at a recent property seminar arranged by a rJapanese broker, as many as 1,000 Chinese showed up, some yelling that he’ll pay whatever the price to buy a certain property. An on-line property seminar organized by a Chinese broker drew even larger crowds, probably 1,500, showing half a dozen of so properties for sale. 

What’s behind this Chinese appetite? Clearly, many Chinese are fed up with and uncertain about the Chinese economy and Xi Jinping’s regime, so they want to move to other countries, including Japan where regulations are most lax. Plus, Chinese investors want to start Air B&B-like accommodation facilities and hotels for incoming Chinese and foreign visitors. It’s the reason why many Japanese hotels and Ryokan inns are being bought by the Chinese.

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