Japan Real Estate In Huge Credit Crunch
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If you think we are having troubles with credit, check out Japan. With banks holding 14 percent of their debt in real estate, they have cut way back on lending to the real estate sector. If they do lend it is with much tougher terms than they have in the past.
The percentage of debt held in real estate is more than occurred in the bubble years creating even more fear for the banks.
The credit crisis is definitely going global which may explain why the dollar has been so strong the past few weeks.
So far this year, 8,916 companies have filed for bankruptcy in Japan, a third of which were in construction or real estate, according to data compiler Tokyo Shoko Research Ltd. Big blowups include real-estate management firm Reicof and condominium developer Suruga. Just last week, Urban Corp., a Hiroshima-based condominium developer and sales agent, filed for bankruptcy.
Banks are likely to clamp down even harder on lending to property firms, and loans granted are likely to be on more onerous terms, potentially resulting in more bankruptcies. Recent earnings reports from Japanese banks have shown a sharp increase in bad debts amid an economic downturn.
“We fear a chain reaction of bankruptcies,” said investment bank Goldman Sachs in a report to investors. Goldman has a “cautious” stance on the Japanese real-estate sector, which means the outlook is unfavorable. The benchmark Topix real-estate index has fallen by about half since June last year. via WSJ.com.
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Comment by Santa Barbara Real Estate Voice on 22 August 2008:
Wow…I have not heard too much news about this. Obviously I stay on top of what is happening here in the US and also I pay a lot of attention to Europe and the recent issues there…especially in England and Spain. I lived over in Japan just after the last boom so it will be interesting to see what happens here. Hopefully not too much doom and gloom.
Comment by Michael Davenport on 9 September 2008:
As you mention, the credit crunch has arrived in Japan - especially in the sectors that saw growth during the last two years, i.e. central districts and suburbs in the three main cities.
However, it is not all doom and gloom. Here in Niseko, the real estate market is still doing well. At Niseko Consulting, we have had more enquiries regarding land and property purchases this summer than last year and we expect that to continue into the winter.
The credit crunch is affecting Japan although the international enclave of Niseko is still going strong.