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(Bloomberg) — For people outside of Japan who want to get into the country’s buoyant property market, one tiny local bank is helping to make that possible.
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Tokyo Star Bank Ltd. is offering accounts and loans for non-residents to buy real estate in Japan, a service that it says has grown rapidly since its introduction last year. Japan’s weak yen and low interest rates have drawn overseas interest in Japanese property and boosted prices.
“We needed a niche to be able to compete in the market,” said Akimasa Tanimura, the executive officer in charge of cross-border business at Tokyo Star. “We’ve been seeing more and more requests from clients in Asian countries.”
The bank has added “several hundred” clients in the year since it started the division — mostly wealthy individuals from Taiwan, mainland China, Hong Kong and Singapore, Tanimura said. It expects its balance of loans to high-net-worth clients through the program to triple in the second half of this year from the first six months.
With ¥2.3 trillion ($16 billion) in assets, Tokyo Star is one of the smaller city banks in Japan, trailing dozens of regional lenders. It’s owned by CTBC Financial Holding Co., Taiwan’s third-biggest financial group, whose purchase 11 years ago made it the first foreign bank to acquire a Japanese lender.
Tanimura said he believes that Tokyo Star is one of the only Japanese banks offering accounts for non-residents, and that the only competition would be the Japan branches of lenders from Taiwan and China.
Tokyo Star’s backing from CTBC allows it to set up accounts and give loans to international clients — something that Japanese lenders typically don’t do because of more conservative know-your-customer practices. It can tap its parent company’s network — which stretches across several Asian countries including mainland China — for such checks, according to Tanimura.
Foreign clients have taken on loans ranging from ¥20 million to several billion yen, which they have used to buy anything from single apartment units to whole buildings and hotels, Tanimura said. The bank even provided a loan for a unit in Azabudai Hills, one of the priciest residential developments to open in the Japanese capital in the past year, where at least one unit reportedly sold for more than $100 million.
“We’ve been seeing new requests from all over Asia,” including from investors who previously bought property entirely with cash because no banks would lend to them, Tanimura said. “Now, they know we can provide a loan, so by using leverage they can expand their investments.”
Tokyo Star’s new business growth offers a peek into the trend of foreign real estate investment in Japan, a market where there is limited data on such transactions.
In Tokyo, average prices of newly built condos hit a record for the third year in a row in 2023. While that was mostly due to low interest rates, a shortage of supply and a dearth of construction workers, demand from abroad was also a factor.
“Asian buyers, especially from Taiwan, Hong Kong and Singapore, dominate the Japanese market,” Christine Li, Knight Frank’s head of Asia-Pacific research, said in a May report. “The rise of private investment is notable, with family offices increasingly moving capital into Japan amid uncertainties in the wider region.”
Tokyo Star wants to make cross-border banking a core business within the next five years — and will target wealthy Chinese across Asia for that growth, Tanimura said. The division has hired about 20 employees in the past year. About half of the 40 workers in the division are Mandarin speakers.
The lender declined to specify how much Tokyo Star charges international customers for loans, but said it was competitive with the rates available for local residents who borrow to invest in property — which are around 2%. The bank typically finances about half of the purchase price.
Tanimura, who has just returned from a trip meeting potential clients in Hong Kong, said there was still high interest in Japanese real estate despite the yen’s recent rebound and the prospect of further rate hikes from the Bank of Japan.
“Yen appreciation I think will definitely have some impact on investor appetite, but we haven’t seen too much impact so far,” he said. “Tokyo real estate is still relatively cheap compared with other parts of the world.”
–With assistance from Taiga Uranaka.
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