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Japan Real Estate - Q2 2017

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Japan Real Estate - Q2 2017

Macro Economy: Japan’s real GDP is estimated to have grown around 1.3% plus in the first quarter of 2017, with a healthy corporate sector and exports to Asian nations contributing to growth. The fluctuation of the currency exchange rate could be a concern once again in the reminder of 2017 while increasing government spending could support underlying base line growth. Core CPI turned into positive territory in 2017 while overall CPI (including fresh foods) was 0.5% in the same period, despite subdued consumer demand and cyclical exogenous factors.

On the back of favorable borrowing costs and negative interest rates, policy cap rates remained extremely tight for assets in the core space. This caused a decline in the volume of real estate transactions in central locations, with capital starting to flow into bay areas in Yokohama and other cities. Due to softening capital growth, total returns posted three consecutive quarters of moderation. Capital raising activities by listed REITs remained at a healthy level, and acquisitions by J-REITs continued to account for 60% of all reported transactions in the country.

Source : Deutsche Asset & Wealth Management

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