The average value of real estate acquisitions made by J-REITs between 2012 and 2017 has exceeded the rosenka tax value by approximately 2.61 times. In 2016 and 2017, office buildings and hotels in central Tokyo, Osaka, Nagoya and around Narita Airport have been purchased by REITS at as much as 5 ~ 15 times their rosenka value.

With monetary easing measures introduced by the Bank of Japan creating a low interest-rate environment, money has been flowing into real estate and pushing up prices of commercial properties. Increasing office rents and a tourism boom has improved revenues on buildings and hotels, spurring REITS to spend more on acquisitions.

The general criterion by real estate analysts has been a multiple of 1.5, which has led some to consider this a sign of new bubble. However, some REITS consider this multiple to be too low given the returns possible in this market. In early 2017, the average dividend yield on office REITS in Tokyo’s central 3 wards of Chiyoda, Chuo and Minato crept below the 4% range, after being in the 5% range during a market downturn in 2011.

About the Rosenka land values:

Rosenka land valuations are conducted by the National Tax Agency on land fronting major roads and cover approximately 330,000 sites across Japan. Valuations are done on January 1 each year, with results announced on the following July 1st. The values are used to calculate inheritance and gift tax and typically represent around 80% of the chika-koji (assessed land values), which may then in turn represent around 60 ~ 80% of actual market values, although this is not always the case.

Source: The Asahi Shimbun, August 26, 2017.

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