The Japanese Real Estate Market
From 2003 to 2007 ample liquidity for debt and equity in real estate had been available. Until the end of 2007, US Investment banks provided 50% of the market’s borrowing. Starting in 2007, the market suffered from the exit of many debt providers, mainly CMBS players in 2008. The Japanese real estate market saw a major change in 2008. Not only did debt liquidity disappear, but also leverage conditions were no longer available.
Today’s domestic banks are not willing to step in and close the gap between their lending guidelines that provide for 60 to 70% of leverage and the 85% plus levels that were available through CMBS players.
While the global financial crisis had a very limited impact on Japanese banks, the real estate market was hit because of the dominance of foreign, mainly US, debt providers on one side and opportunistic investors with a strong dependency on high leverage on the other side.
This market environment attracted new long-term oriented core investors who had difficulties entering the market before. German Open End Funds invested close to JPY 200 bio in 2008, four times that of their 2007 investments and twice their total investment in Japan to date.
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