Property companies are faring well in Japan, with the real estate portion of the Topix index one of ...
Property companies are faring well in Japan, with the real estate portion of the Topix index one of the best performing sectors year to date.
The real estate sub sector is up 19.85% in yen terms over the year to 20 August, compared to the index as a whole, which is down 10.01% over the same time.
Over the year to 20 August 2001, the best-performing stock in the sector was Joint Corporation, which returned 134.89% in yen terms. This is followed by Tokyu Land Corporation, which has risen by 117.24%.
Kevin Gibson, head of Japan at Edinburgh Fund Managers, says that the strong share price of Japanese property and real estate is down to several factors.
The first, he says, is the launch next month of Japanese Real Estate Investment Trusts (JREIT). These investment products will be aimed at domestic investors and will pay dividend and income from the rent they make. Gibson says these investment vehicles look very attractive as the indication is that they will be yielding 5.5%, comparing favourably with the yield from Japanese government bonds of 1.3%. He notes that the demand for these products is likely to be high.
Chizuko Nara, head of Japanese equities at First State Investments, says the first few JREIT's will attract a lot of investors, and the market is looking at these vehicles to increase liquidity in the real estate market. She says the first few launches will be successful given the way the market is and the declines it has been seeing.
The companies launching the first JREIT's are Mitsubushi Estate and Mitsui Fudosan. Nara says these companies will be listed at the beginning of September. She adds that it is because of the launches of these JREIT's that more momentum has been placed on the real estate market, and has been behind its rise over the last month.
Gibson says another factor attracting the attention of investors is Prime Minister Koizumi's plans for urban renewal as part of his overall reform proposals. Gibson says there are planned projects for fast train access to the airport and general urban renewal, particularly in the Tokyo Bay area.
The final reason for the strong performance of real estate, Gibson says, is the 1984 analogy. He says: 'Before 1984, video recorders were hitting the market and driving performance in Japan, however between 1984-86 these sales matured and video recorders started to underperform and real estate stocks started to perform. We see a similar situation now with tech underperforming and real estate now beginning to outperform.'
Nara says that real estate has done particularly well because it is viewed as a defensive growth stock area, which many people have moved into as the Japanese market has declined.
While real estate has performed well throughout the year, she says, it has been over the past months that performance has been at its strongest.
She says: 'Six months ago there was very little interest in the market as people expected a recovery in the technology market, but this has not happened. With the US market also slowing down, Japanese investors have turned to more domestic areas like real estate.'
Moves to overweight equities and fixed income
The Big Interview: Focus on ethical investment
View from the front row
'No control or oversight'
359 new customers in 2018