New real estate loans in Japan at record high in H1

The Bank of Japan last month said it was monitoring bank lending to the real estate sector to guard against excessive credit but did not see signs of a bubble. Property is a sensitive subject in Japan because land and asset prices inflated rapidly during
The Bank of Japan last month said it was monitoring bank lending to the real estate sector to guard against excessive credit but did not see signs of a bubble. Property is a sensitive subject in Japan because land and asset prices inflated rapidly during the 1980s economic bubble. Asset prices then collapsed in the 1990s, and the country still has not fully shaken off the impact. PHOTO: BLOOMBERG

TOKYO • New lending to Japan's real estate sector rose to a record high in the first half of the fiscal year, exceeding loans during the bubble economy of the 1980s, in a warning that the sector could be overheating.

Real estate is a sensitive subject because land and asset prices inflated rapidly during the 1980s economic bubble.

Asset prices then collapsed in the early 1990s, and Japan still has not fully shaken off the impact.

New real estate lending in the April-September period rose 16 per cent from the same period a year earlier to 5.9 trillion yen (S$79.2 billion), data from the Bank of Japan (BOJ) showed yesterday.

This exceeded the previous peak in real estate lending in the first half of fiscal 1989.

Total new lending in April-September also rose 16 per cent from the same period a year earlier to 23.9 trillion yen.

  • 16%

  • Rise in new real estate lending in the April-September period, from the same period a year earlier.

Bank lending, which has been rising since 2013 when the BOJ began quantitative easing, has accelerated even further after the central bank said in January that it would adopt negative interest rates.

The BOJ last month said it was closely monitoring bank lending to the real estate sector to guard against excessive credit but did not see signs of a bubble.

Meanwhile, in London, land values in its best districts lost 10.3 per cent in the year through September, the biggest fall in at least five years, as higher taxes and the Brexit vote caused luxury home prices to fall.

Banks are less willing to lend for site acquisitions and construction, fuelling the decline in values, said broker Knight Frank in a report yesterday.

Developers also need to raise their profit margins as a buffer against any further falls in home prices, the broker said.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 17, 2016, with the headline 'New real estate loans in Japan at record high in H1'. Print Edition | Subscribe