Real Estate Trends in Japan- Tokyo, Osaka, Nagoya

The following report doesn't look to put smiles on the faces of the Japanese construction industry, which is still reeling due to the state of the economy. There are few industries in worse condition, but the report doesn't paint a pretty picture for any of us;

The global economic recession impacted Japan severely and especially affected the real estate industry. A weak economic recovery is now underway, helped by government stimulus spending and tax reforms. We expect growth to remain weak, just managing to stay in positive territory, to reach about 1.2% year-onyear (y-o-y) in 2012 and 2013. However, the economy has racked up chronic fiscal deficits and a huge public debt worth around 200% of GDP. The outlook is not bright, as the country moves from net saver to net debtor status. The real estate market is also problematic. Japan’s residential sector is suffering from record low levels of new construction. According to the Japan Real Estate Institute (JREI), residential land prices have slid more than 40% from their 1991 peak and land prices in Japan’s six largest cities fell 7.8% (9.2% in real terms) y-o-y in H109. The Tokyo office market has reached its highest vacancy level for six years. There were dramatic rental falls in Tokyo office space to late 2009: Tokyo (Inner City) rents plunged 23.3% y-o-y, while Tokyo (Outer Central) rents dropped 21.9% y-o-y. Osaka saw a similar tale of increases in vacancies. In Tokyo, retail rentals dropped by about 50% y-o-y in 2009, and industrial rents were down by 10-20% y-o-y. In Osaka, retail rentals dropped by 15-20% y-o-y in 2009 and industrial rents were down by 10- 20% y-o-y. In Yokohama, rental rates for all types of commercial property fell by 20-30% y-o-y in 2009. In the longer term, while the weakness in the economy and the lack of funding seem likely to keep housing prices under downwards pressure, demand – driven by population necessity – will pick up, requiring supply to meet it. In general, commercial real estate rents and prices also seem likely to soften further, given the rising vacancy rates and the tendency for companies to downsize. Also, there is little scope for improvement in the industrial sector, given the likelihood that the economy will remain fairly stagnant over the next year or so. However, there are signs that retail property may be on the rebound, as a result of increasing consumer spending as the economy recovers.

Taken from CompaniesAndMarkets.com; "Japan Real Estate Report Q3 2010".

Looking at the above, how much do we believe the newspapers about how the economy is recovered and that the outlook is much brighter?