Category Archives: BUSINESS

Lessons from Europe

Author: Paola Subacchi, Chatham House

More than a decade on from the most devastating financial crisis since the crash of Wall Street in 1929, politicians and commentators have been extremely careful in offering predictions on when the next crisis will occur. Playing with economic predictions is like playing with fire. Nobody knows this better than former British prime minister and chancellor of the exchequer Gordon Brown, who repeatedly promised ‘no return to boom and bust’.

All at sea? Supporters of the ‘Fishing for Leave’ group protest against British Prime Minister Theresa May’s Brexit transition deal in April 2018 (Photo: Reuters/Peter Nicholls).

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But there are reasons to be concerned. The gradual normalisation of US monetary policy could generate adverse spillover effects and disrupt global financial stability. Red lights are already flashing in Turkey and Argentina. A major correction in the United States’ stock market could trigger a significant shock for the rest of the world. High levels of debt, maturity mismatches and carry trades financed by short-term debt could fuel contagion through financially integrated markets. In addition, the deterioration of multilateral economic relations in the last 18 months might make crisis resolution more difficult than it was in 2008–09.

As things stand, even if we don’t know how the next crisis will materialise, where the epicentre will be and which countries will be hit, we can infer that it will …continue reading

    

Lending tightens for investment properties

The fraudulent investment scandal, propelled by Suruga Bank, is having far reaching consequences for the investment property market with investors, even legitimate ones, finding it increasingly difficult to obtain financing. Since the start of the year, the price of investment properties has fallen. Meanwhile, outstanding loans to private investors has reached 23 trillion Yen (approx. 202 billion USD).

Suruga Bank, once highly praised by the Financial Services Agency (FSA), was hit with a 6-month ban on new real estate loans from October 6, effectively cutting off one of the major sources of lending for non-credit worthy individuals and the real estate companies that target them. Lending started to tighten late last year and early this year, with some investment spruikers seeking creative ways and illegal ways to secure financing from other banks.

According to the Bank of Japan, new property loans to individual investors in the second quarter of 2018 totaled 560.3 billion Yen, down 22% from the same quarter in 2017 and almost half of the peak seen in the third quarter of 2016.

Investment property information site, Kenbiya, reported that the average price of a wooden apartment block in the third quarter of 2018 was 66,130,000 Yen, down 3.9% from the first quarter of the year but still up 11.4% from 2016.

With financing drying up, investment spruiking companies are starting to close up shop. The properties sold to inexperienced investors have, for the most part, limited resale and rental potential. They were sold at overinflated prices with faked rent rolls, occupancy rates and rental yields. Many were located in regional or inconvenient areas. Some owners of share houses purchased from a defunct share house developer in Tokyo’s 23 wards are even reporting difficulty in finding property managers to take over the leasing due to the low occupancy rates of the buildings.

Sources:
Kenbiya, …continue reading

    

Kyoto’s most expensive apartment building is almost sold out

Kyoto City’s most expensive apartment building since 1995 is already close to selling out prior to the start of official sales. 90% of the apartments in The Kyoto Residence Gosho-Higashi have already been pre-sold to buyers, with the remaining 4 units offered in the first round of public sales held on October 13th. The four apartments are priced from 105 to 157 million Yen (approx. 935,000 ~ 1,400,000 USD). With an average price of around 1,600,000 Yen/sqm (approx. 1,325 USD/sq.ft), this is the most expensive apartment building to go on sale in the city since 1995. It has beaten a previous record set in 2015 by The Parkhouse Kyoto Kamogawa Gosho-Higashi which had an average price of between 1,300,000 ~ 1,400,000 Yen/sqm when new.

The smallest unit to go on sale is a 67 sqm (720 sq.ft) 2 bedroom apartment priced at 105 million Yen.

The luxury residences are located on the eastern side of the Imperial Palace grounds and 600 meters from Kamo River. This is the first freehold condominium to be developed on the eastern edge of the Imperial Palace in over 29 years.

The 5-storey condominium is due for completion in February 2019. Apartments range from 53 ~ 197 sqm (570 ~ 2,120 sq.ft). Residents will have access to bilingual concierge services provided in conjunction with the Kyoto Hotel Okura. The concierge can help to arrange for catering, car hire, sightseeing, linens and bed-making, house keeping, and shopping for / stocking apartments before residents arrive.

Location

Somedonocho, Kamigyo-ku, Kyoto City

Source: Keihan Real Estate News Release, October 11, 2018.

…continue reading

    

The Terrifying Beauty of Uniqlo’s Robotic Warehouse

Japanese retailing giant UNIQLO opened their Ariake offices back in 2015 but the warehouse was plagued with problems and inefficiencies. So the company committed to overhaul the warehouse, which was unveiled last week. The result, in which 90% of the warehouse workforce was replaced by robots, is equally beautiful and terrifying. In the video above […]

…continue reading

    

How to save the world trading system from Trump

Author: Mari Pangestu, University of Indonesia

Despite expectations that the US Federal Reserve would raise interest rates, capital flows to the United States have led to the appreciation of the US dollar against most major currencies.

Workers work near a Harley Davidson motorcycle at a garage in Bangkok, Thailand, 28 June 2018 (Photo: Reuters/Athit Perawongmetha).

The hardest hit countries are Argentina and Turkey, which are experiencing fiscal issues complicated by their political situations. Brazil, South Africa and the emerging countries in Asia have also been affected — albeit at a lower rate of depreciation of their currencies in the 10 to 12 per cent range. Even Australia and China have experienced depreciations of around 8 per cent and 5 per cent respectively.

The level of depreciation experienced by different economies reflects how investors perceive their different fundamental macroeconomic conditions, especially the level of their current account and fiscal deficits and policy outlooks.

The rising US dollar raises questions about the capacity of emerging economies to service their dollar-denominated debts and the vulnerabilities this could expose in their financial systems. Even if the current economic conditions point to a low potential for contagion from Argentina and Turkey, IMF Managing Director Christine Lagarde recently warned that ‘these things could change rapidly’. The uncertainty that already exists is a clear and present danger.

The uncertainty in the world economy has been increasing since Brexit and the election of President Trump in 2016, and in 2017 as the United …continue reading