Japan still a draw as Singapore property players look beyond Tokyo

Business Times

22-06-2025

[SINGAPORE] Japan's property market remains a firm favourite among Singapore-based property investors, who continue to deploy capital into the country despite global interest rates coming down.
What has changed, however, is the type of Singapore investor making these plays and where they are looking. Rather than newcomers to the market, many of today's buyers are those who have already invested in Japan and are now looking to expand their portfolios more strategically.
Melvin Chay, senior director of capital markets at Knight Frank Singapore, said: 'While we still see pockets of investors that previously never had Japan on their radar, much of the capital inflows today are follow-on investments from investors that entered the market in the last two to three years.'
These investors, who are now more familiar with the Japanese market, are also venturing beyond traditional 'Tier-1' cities such as Tokyo and Osaka to areas such as Kyoto and Fukuoka – which offer higher yields of up to 5 per cent.
Chay said that investors are willing to increase their risk appetites and look beyond Tokyo to combat rising interest rates and ensure returns.
'We're also seeing investors targeting opportunities with redevelopment or additions and alterations angles, signalling a willingness to go up the risk curve to drive returns,' he added.
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Beyond the usual suspects
The first half of this year saw brisk movement in the Japanese market.
In June, for instance, Frasers Hospitality launched Yotel Tokyo Ginza in a tie-up with British hotel chain Yotel. The 244-room accommodation targeted at business and leisure travellers is located in Ginza, a shopping district popular among tourists in the Japanese capital.
It is Yotel's first property in Japan. While the tie-up marks Frasers Hospitality's first investment and development project in Japan, the hotel is its second asset there. Its first, a 124-unit rental apartment in Osaka, was acquired through a joint venture with real estate investment firm Alyssa Partners.
' Property yields in Japan remain in the 3.5-4% range, creating a positive yield spread that remains highly attractive to investors. '
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Melvin Chay, senior director of capital markets at Knight Frank Singapore
Other Singapore-based investors have also been ramping up their exposure.
Early this year, real estate and private equity firm Patience Capital Group partnered with Hong Kong-based Gaw Capital to acquire Tokyu Plaza Ginza in Tokyo. It also raised 39 billion yen (S$343.4 million) for its Japan Tourism Fund to revitalise ski-resort towns such as Myoko in Niigata and Madarao in Nagano.
CapitaLand Investment has likewise been active. In December 2024, it acquired four self-storage facilities in Osaka, and followed up in June 2025 with a mixed-use property in Tokyo.
Others have cast their sights farther afield. Far East Hospitality Trust's first Japanese hotel acquisition, announced in February this year, was Four Points by Sheraton Nagoya. The trust's managers noted that the location – in central Japan – has vast potential for tourism, and grants travellers access to other destinations such as Nagano, Toyama, Kanazawa and Kyoto.
Last year, CapitaLand Ascott Trust completed the acquisition of a 258-unit rental housing property in Fukuoka. More recently, it purchased two hotels, ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, for 21 billion yen.
Why Japan still makes sense
Even as global interest rates begin to decline, Japan's real estate market continues to present a compelling case for Singapore-based investors.
The country's borrowing costs remain comparatively low. On Jun 17, the Bank of Japan maintained its benchmark short-term interest rate at 0.5 per cent, lower than that of most Asian markets.
'At the same time, property yields in Japan remain in the 3.5 to 4 per cent range, creating a positive yield spread that remains highly attractive to investors,' said Chay.
Moreover, the yen's continued depreciation has made Japanese assets even more affordable for Singapore investors, enhancing the appeal of deals in both major cities and regional locations.
' Even if interest rates were to rise, Japan's interest rate is still among the lowest in the world. So you could still undoubtedly make a good yield spread here. '
—
Jason Leong, head of investment and asset management at Frasers Hospitality
Currently, S$1 is equivalent to about 113.58 yen. Five years ago, S$1 was equivalent to about 100.94 yen. This means that the yen has weakened about 12 per cent against the Singapore dollar over the last five years.
'Despite rising asset values in recent years, commercial real estate and hotel assets in popular tourist areas – such as Tokyo, Osaka and Kyoto – remain appealing to investors looking to grow their presence in Japan,' said Carmen Lee, head of investment research at OCBC.
Japan's popularity among tourists is also translating into investor interest, particularly in the hospitality sector. Visitor arrivals hit a record 36.8 million in 2024, surpassing pre-pandemic highs.
Jason Leong, head of investment and asset management at Frasers Hospitality, said that there is still 'a very visible yield spread' in hospitality property investments. 'Even if interest rates were to rise, Japan's interest rate is still among the lowest in the world. So you could still undoubtedly make a good yield spread here.'
Frasers Hospitality is also confident in the growth of the Japanese market, he added. While there has been enormous growth in Japan tourism over the last decade, the tourism industry is not saturated yet, he noted.
Looking ahead
'As one of the few mature markets with a relatively large investable stock in multiple cities and sectors, Japan will remain as a hot destination for Singapore property players,' said James Young, head of investor services for the Asia-Pacific, Europe, the Middle East and Africa at Cushman & Wakefield.
Sectors such as hospitality, prime office and retail, senior housing, logistics and data centres continue to draw attention.
Moreover, Singapore's market is limited in terms of assets available for acquisition. So most real estate investment trusts will look to add assets outside of the city-state for their earnings, said OCBC's Lee.
While Japan remains hot, other markets are also warming up as global rates fall. 'The US, the UK, Australia and China selectively are now quite attractive from both pricing and long-term growth perspectives,' said Young.
Investments in student housing and serviced apartments in cities such as London, Hong Kong, Sydney and Seoul are also likely to rise.