Japan’s property market continues to provide yield-starved investors with vibrant returns. Negative real interest rates, attractive mortgage terms and plenty of liquidity have boosted prices for the past two years.
One beneficiary is Axa Investment Managers – Real Assets, which said on Thursday that its Tokyo Office Property Fund has delivered a return of more than 25% this year, easily beating its original target of 10%.
The ¥20 billion ($158m) fund, which was launched in 2012, is invested in five core properties with Sumitomo Mitsui Trust Real Estate Investment Management partnering as asset manager.
Japanese property funds have been Asia’s best performers for at least two years. They returned 21.5% last year and 20.7%, according to the Asian Association for Investors in Non-listed Real Estate Vehicles (Anrev). In contrast, Chinese property funds had negative returns last year, while all funds monitored tracked by Anrev gave average returns of 11.7%.
Meanwhile, Japanese Reits have an average dividend yield of more than 3% (compared with negative yields on 10-year government bonds), according to Bloomberg data, and also have tax advantages as well as 100 percent payout ratios.
Axa IM - Real Assets intends to achieve similar success in other Asian territories. It also has offices in Singapore and Seoul, and last month it bought Sydney-based Eureka Funds Management, which currently manages around A$5bn ($3.1bn) of assets under management.
“We consider the Asian market as an attractive investment opportunity for AXA IM - Real Assets and our global clients, with the importance of the region heightened as volatility and unpredictability affects other key geographies,” said Frank Khoo, global head of Asia at AXA IM - Real Assets, in a statement yesterday.
However, it might tougher for Axa to make similar returns in other Asian markets.
Earlier this week, Claudio Saputelli, head of global real estate in the Chief Investment Office at UBS Wealth Management, warned that Hong Kong re-entered bubble risk territory in 2015 and prices have been falling rapidly during the past year. Meanwhile, Singapore property prices continue their five-year slide.