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Niseko Property Investment (UPDATE)

06 Aug

Niseko Property Investment (UPDATE)

Billion-dollar baby! Current Niseko development projects close in on USD1 billion value.

In March 2018 we lifted the lid on the Niseko Property Investment Boom taking place in Japan’s Niseko ski resort and listed some of the new projects that were planned or underway.

Many of these new builds are led by hotel-branded and managed property providers creating condo-hotels and detached houses with a hospitality offering in the form of swimming pools, spa and health facilities, members clubs etc. Often with flexible configurations and numbers of keys, these are designed to maximise owners’ return on their investment. Consulting firm C9 Hotelworks Hospitality Consulting puts a value on projects currently on sale at close to USD 1billion (June 2018 Niseko Japan Property Market Review).

Work on these new projects is progressing through the summer in order to be ready for the coming ski season. Before digging into the details, now is a good opportunity to reassess the factors behind the growth in investment. Why is this popular dual-season resort, as well as its Hokkaido neighbours Furano, Rusutsu and Kiroro, increasingly seen as hot property tickets by international property brands and buyers alike?

Niseko Property Investment Mount Yotei

Tourism’s boost from the fall in value of the Japanese Yen and the relaxation of Visa requirements.

The fall in value of the Japanese Yen since 2011 and the relaxation of visa requirements for a number of countries, starting in 2013, have had a profound impact on the tourism industry in Japan as a whole and Niseko in particular. This not only makes the area far more accessible to many more international travellers but also makes the resort ripe for property investment. For example, there are now direct international flights from eight mainland China cities to Sapporo’s New Chitose airport with an eight-year CAGR in flights of 32%. Niseko has seen an impressive year on year growth of visitors since 2011 and in 2017 Niseko experienced a rise of 17% in foreign visitors with a 5-year CAGR of 16%.

While Japanese tourists continue to make up the majority of summer visitors to Niseko, the latest data from the Hokkaido Bureau of Tourism and Niseko Town Office shows visitors from Hong Kong grew by 49% (representing 22% of international visitors), followed by China and South Korea (representing 18% and 17% respectively).

Proving that Niseko’s plethora of activities make it a fantastic dual-season resort, the 2017 summer season accounted for a whopping 48% of the yearly visitors to the resort.

Things to do in Niseko back country skier
Niseko Mount Yotei winter

Niseko was put on the map as a winter destination by powder-hungry Australian skiers, and they still contribute the largest percentage of winter visitors at 29%. However, a high base leads to a low growth rate (4%). Hong Kong and Singapore visitors accounted for 19% and 12% of international visitors but growth rates were also in the single digits. The stand-out growth rates were seen from China (+26%) and the USA (+16%). Clearly China’s 5 million skiers are gearing up for the Beijing Olympics in 2022 and President Xi Jinping’s target of 1,000 ski resorts and 300 million skiers by 2030.

All these factors have contributed to the Niseko property investment boom that we are seeing this year.

And to see what happens when you combine a trifecta of the lower Japanese yen, freehold property rights and rising property prices read on …..

Niseko Property Investment market trends – condominiums.

Niseko Property Investment luxury condominium master bedroom

The average built-up price for a condo apartment is USD15,964 per m2, rising 25% from a year earlier. The hottest of hotspots is Hirafu with 250 units representing a value of USD375 million, followed by Hanazono & Annupuri with 100 units and USD300 million value.

Source: C9 Hotelworks Market Research

What size of condos are selling the most? The Niseko property investment sweet spot is 1-2 bedroom condos, perfect for summer and winter rentals with price levels that ensure a (more) reasonable yield. Average sales prices for these are USD1.5 million with an average of 4.5 units sold per month.

Source: C9 Hotelworks Market Research

Niseko’s land plot and house market.

Source: C9 Hotelworks Market Research

An alternative form of Niseko Property Investment is for investors who are prepared to wait for their dream ski home and either want to design themselves or use a developer’s recommended architect. In this case the smart thing to do is buy land but don’t dawdle as prices are rising. Individual land plots are selling at an average price of USD911 per sqm and average built-up prices for houses at USD5,081 per sqm. Four-bedroom homes with an average price of just over USD1million are selling the fastest.

As an agent covering ski areas in Japan, Switzerland and France it is always interesting to compare what I am seeing in Niseko to the Alps, despite the obvious caveat that they are at different stages in their property cycles. For example, the largest proportion (22%) of new houses on sale in Niseko are over 350 sqm living area with 29% of them sitting on plots of land greater than 1,200 sqm. While I do not have comparable statistics to hand for either of the other two markets, anecdotally I can tell you that these are much larger units and plots than are being built in Europe. And built-up prices are quickly catching the likes of Europe’s more expensive resorts.

Where is the best value property to be found in Niseko and Hokkaido?

Niseko Investment luxury new build

Price rises in Hirafu are spilling over into other areas, yet certain projects still offer value for money and a better prospect of ROI. Annupuri still trades at a discount to Hirafu and one of our favourite new land and house package developments Niseko Annupuri Residences is offering land and house packages with land at around USD250 per sqm, though prices are due to be increased soon.

Within one to three hours of Niseko the resorts of Furano, Rusutsu (voted Japan’s best ski resort in 2017) and Kiroro are also seeing new developments of condo-hotels. Prices range from USD7,000 per sqm to USD10,000 per sqm with projected investment yields of up to 6%.

Things to do in Niseko onsen Mount Yotei view
On piste in Niseko Ski Resort.

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