TOKYO: Construction of apartment and rental housing is on the rise in Japan and showing some signs of over-supply, the Bank of Japan said on Monday, signalling concern over a future glut in the property market. Small apartment and condominium block development have been a rare source of lending growth in an economy struggling to spark activity. However, much of this represents speculative investment, not housing demand, as wealthy people chase tax breaks and yield, amid a near zero interest rate environment.
Japan is stepping up its supervision of bank lending amid growing concerns a spurt of construction financing for new apartment blocks could be sowing the seeds for future bad debt, people involved in the matter have told Reuters. Demand for rental housing remains strong in big cities like Tokyo, the BOJ said in a quarterly report on regional economies issued on Monday.
“But some property brokers are citing rising vacancies and falling rent for less attractive housing,” the report said. “While many companies say financial institutions continue to extend loans actively for rental housing construction, some say they are becoming cautious on fears of over-supply,” it said. Some analysts have criticised the BOJ for sowing seeds of a future bubble by flooding markets with extra cash which, instead of boosting capital expenditure, may be funding speculative investment in property.
