Will the Coronavirus Epidemic Affect the Tokyo Real Estate Market?

The world is now facing one of the most pressing global emergencies in recent history, as a virulent novel strain of coronavirus sweeps across the globe. As the number of confirmed cases and affected countries continues to increase, the world economy is reacting in a dramatic fashion. The Dow Jones Industrial Average crashed an almost unprecedented 1,190 points this week, a total decline of over 4%, the worst since the 2008 financial crash. The Nikkei Stock Average was not far behind, similarly falling 4%. 

Many fear how the virus will continue to negatively impact global productivity, and for good reason; the virus has already crippled supply lines in China that much of the world relies on, and as other countries become more directly affected the situation will only grow more dire. Japan in particular has much to lose, especially given how important China is to Japan’s economy, both in terms of the huge numbers of Chinese tourists that prop up Japan’s tourism industry, and China’s domestic demand for Japanese exports. 

Despite these dramatic short-term effects on the local economy, however, it remains to be seen whether the Tokyo real estate market will take a turn for the worst in the long-term. The domestic real estate market in Tokyo has been growing steadily for the past 30 years, and prices are now almost at pre-Bubble era levels. Real estate is also a less vulnerable industry than the tourism or consumer goods industries, as it’s less dependent on the flow of cash and visitors from overseas. Real estate transactions with foreign investors may suffer, however, as restrictions on travel become stricter and more people decide to stay in their home country rather than flying to Japan to view properties or close on deals. Still, it seems doubtful that a temporary decrease in purchases from foreign investors could have a long-term effect on the market. 

As the virus continues to spread with no sign of slowing its global expansion, it’s difficult to predict which sectors of the global economy will be affected, but for the time being the Tokyo real estate market seems unlikely to change its slow but steady upward course. It may take a temporary hit, but a slight dip in prices may actually result in some opportunistic investors buying up properties, likely with the assumption that the market will bounce back after the worst of the crisis has passed. Only time will tell if that optimism will pay off, or if this epidemic will have more-far reaching effects on the world economy than any of us can predict. 

Editorial Department

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