A 2.5-year closure to inbound travel hasn’t slowed investment in Niseko’s ski resort market with the Nikkei Shimbun reporting that the ‘Aspen of Asia’ has seen over 20 billion Yen (approx. US$138 million) in known real estate purchases by foreigners each year. The very recent weakening of the Yen this year is said to be contributing further to demand.
Many of the buyers come from Hong Kong, as well as Taiwan, Malaysia and South East Asia. Since the start of 2022, the Yen has fallen in value by around 20% against the USD and is at a 20-year low, giving offshore buyers more purchasing power than before.
In 2021, the Hokkaido Shiribeshi General Sub-Prefectural Office approved 13 development applications in Niseko and Kutchan. Between 2017 and 2019 there were under 10 approvals a year.
The gap between market prices and land values has been widening as development heats up. A government-assessed survey site near Grand Hirafu was valued at around 151,000 Yen per square meter by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) on January 1, 2022. However, according to someone in the construction industry, land in this area typically sells for around 605,000 Yen per square meter – four times the government value.
With actual transacted prices far exceeding government-assessed land values, banks, which typically use government valuations as part of the appraisal process, often come nowhere near close to being able to fully finance a purchase. As a result, cashed-up foreign buyers who don’t rely on loans are the mainstay of the property market.
A number of condominiums are under construction or planned in the vicinity of the Grand Hirafu ski resort. Many are operated as condo-hotels, allowing the individual owners to let the on-site hotel lease out their rooms to guests when they aren’t using them. Many buyers have fully funded their purchases without relying on financing, which meant they were able to withstand the drop-off in tourism revenue during the pandemic. In 2017, Niseko welcomed a record high of 220,000 foreign hotel guests, up five-fold from 2007. In 2021, with inbound travel bans, there were just 77 foreign guests according to a Bloomberg article published on September 28.
Kutchan Town is considering strengthening restrictions on large-scale hotel construction to avoid overdevelopment, with several developers scrambling to get applications in before the rules tighten. While this might slow the number of new projects, local brokers expect no shift in demand, with condominium pricing in Niseko said to be just a fifth of what pricing is in Canadian and Swiss ski resorts.
The Nikkei Shimbun, September 26, 2022.
Bloomberg, September 28, 2022.