If we had invested in Beijing’s real estate in 2002 or in London’s real estate in 2006, by the time their respective Olympic Games came around six years later in 2008 and in 2012, we would have been sitting on rather handsome financial gains.
Comparatively, if we had invested in Singapore’s real estate in 2004 and six years later when both the integrated resorts opened in 2010, we would have made a handsome profit on our real estate investments.
It is great to be able to learn from hindsight. And even better if we could invest with the wisdom of hindsight.
In about six years from today, Japan will host the 2020 Summer Olympics and the Paralympics and if the parliament passes the casino bill this autumn, we might see a few (some say up to five) casino-integrated-resorts ready before the Tokyo 2020 Olympics kick off.
Casinos and Tourism
The casino bill is expected to approve integrated resorts, not standalone casinos, similar to what we have in Singapore, with investment values expected at several billion US dollars per resort. Some estimates stated that Japan’s gaming revenue may reach US$40 billion per year by the year 2025. But that hardly makes a difference for a country that has a gross domestic product of about US$6 trillion.
The casino initiative, implemented in tandem with the infrastructure build-up for the Tokyo 2020 Olympics, will give a boost to tourism and tourism-related employment. The relaxation of visa requirements for citizens of many South-east Asian and Middle Eastern countries, coupled with a weak Japanese yen, is sending droves of visitors to Japan. Several data sources reported that for the first time in over 40 years, there are more visitors going to Japan than there are Japanese tourists going abroad. Visitor arrivals for 2014 is expected to surpass the all-time record of 10.4 million visitors achieved in 2013.
Foreign visitor arrivals to Japan (1990 to June 2014)
Source: Japan National Tourist Organization (JNTO), Century 21 Singapore
Again, these record-breaking visitor numbers has not translated to a major impact on Japan’s total tourism market – at least not yet. Just consider the historic city of Kyoto, which is known for its 2000 shrines and temples and named the “world’s best city” in a recent survey of readers of the US magazine Travel + Leisure, Kyoto welcomed over 51.6 million tourists in 2013 but only 1.1 million were foreign visitors. Domestic tourism accounted for 98 per cent of the headcount, but watch the growth of foreign visitors, it will be huge.
Education tourism is also on the rise. Already in place for two years is a “Global 30” project for universities to take in foreign students for degree courses that are fully taught in English. Thirteen of the best Japanese universities have been selected to welcome up to 300,000 international students. The prestigious University of Tokyo, which has been ranked number 1 in Asia by various agencies for the last two decades, started this program with its first intake in October 2012 and to top it off, the school fees for foreign students is JPY580,000, or about S$7,100, per year!
Reversing Population Decline
Japan’s welcoming of international students to its top universities with degree programs fully taught in English reflects an acknowledgement that a declining population is not healthy for Japan. There are not enough young people entering universities, and subsequently the workforce, to replace the retirees leaving the workforce. According to Japan’s Ministry of Internal Affairs & Communications, the unemployment rate stood at a relatively healthy 3.8 per cent in July 2014. Although this equates to about 2.48 million unemployed Japanese people, the number of job vacancies at 842,000 (based on June 2014 data released by Japan’s Ministry of Health, Labour & Welfare) is close to an all-time high of 869,000 achieved in May 2006, two years before the Lehman Crisis.
There is a concerted effort from various government agencies to reverse Japan’s brain drain, to lure foreign talent and to boost economic growth. It has been decades since Japanese innovations such as the Sony Walkman and the Nintendo Game & Watch conquered the gadgets world. Aggressive deregulation for immigration and manpower (better known in Singapore as “foreign talent”) policies will increase population numbers and boost overall consumption expenditure.
The new Tokyo Governor, Mr Yoichi Masuzoe, was quoted in May 2014 saying that he would set up a special district within Tokyo with relaxed labour regulations to attract talent for the finance, healthcare and pharmaceuticals development. He said, “We have to import many intelligent people from abroad. We badly need young talented persons.”
Among the reforms tabled in government for attracting high-skilled human resources from overseas are: shortening permanent residency waiting times from five years to three years, loosening income requirements to allow migration of parents and housekeepers, providing better recognition of research achievements and certain professional degrees such as Masters of Business Administration (MBA) and Masters of Science in Management of Technology (MOT).
Opening Doors, Opening Minds
Opening the doors to more foreign visitors, creating new jobs in the tourism industry, pulling in foreign talent for finance and medical industries, welcoming more Permanent Residents and reversing the population decline – all these will drive immediate demand for real estate, especially for hotels and residences.
Singaporeans should know better. During 2006-2010, before the opening of the two integrated resorts, Singapore opened her doors wide to foreign talent and property prices surged on the back of the increased demand, especially residential prices. After the opening of the integrated resorts, hotel room rates and occupancy levels jumped.
Most economists have not adjusted their forecasts for Japan’s GDP to take full account of the policy changes and the impact of the casinos. But I would like to look beyond the financial contributions and GDP. I see these incremental improvements as signs of a broader movement. They are like little snowballs that started to roll down a mountain peak, given time to accumulate momentum, their combined impact will be massive.
It is the mindset change of a whole nation. A closed door is now opened.
Skyline of prime real estate in Shinjuku, Tokyo.
Photograph by Ken Koh