Tuesday 24 October 2017

Tokyo is No. 1 city for returns on residential

Neil Callanan

TOKYO is the best city for residential-property returns, broker Savills said, as Japanese Prime Minister Shinzo Abe's policies stimulate the economy and increase investor confidence.

Tokyo, chosen to host the 2020 Olympics, has "extremely attractive" gross rental yields of 4.7pc compared with about 0.8pc for Japanese 10-year bonds, Savills said in a survey of 10 global cities.

New York ranked second with a margin of 3.6pc between rental returns and the 10-year Treasury yield, while Paris was third with a margin of 2.7pc over its government's bonds.

Japan's real estate market is showing signs of a rebound amid efforts by Mr Abe to revive the world's third-largest economy.

Housing starts rose for an 11th month in July, the longest streak since February 2004, according to the land ministry.

The value of homes in the country's capital rose 1.2pc in the first half of this year, data compiled by Savills shows.

Tokyo "looks a surprise but convincing 'buy' for investors", offering a yield at 3.9pc over government bond rates, said Yolande Barnes, a director of residential research at Savills.

New York's "residential real estate continues to appear a sound investment both for income and capital growth potential", she said.

Home values in New York may surge 30pc in the next three years, Barnes said. The city had ranked first in both surveys last year.

Tokyo's residential values may also rise by at least 10pc during the same period, she wrote in the report, without being more specific.

Mumbai homes were ranked last in the survey because the market looks overvalued and has "negative rental growth with pitifully low 'net of gilt' yields" of minus 4.2pc, according to Barnes.

The survey compares gross rental income and subtracts 10-year government bond rates to allow comparisons of performance against local risks.

London ranked fourth, followed by Singapore, Sydney, Hong Kong, Shanghai and Moscow. (Bloomberg)

Irish Independent

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