REthink Tokyo recently spoke with Keigo Kuroda of CROSSPATH ADVISORS on where he sees the present day status of ultra luxury real estate in Japan and what the future holds for the segment.

Tell us a little about CROSSPATH ADVISORS?

CROSSPATH ADVISORS (“CROSSPATH”) has clients mainly in Taiwan and HK most of whom are high net worth (“HNW”) individuals, family offices and residential focus funds.  We have been involved in a number of residential transactions and have been managing assets for clients across Japan.

We currently have 14 assets under management encompassing various property types such as residential, hotel, vacation rental houses, resorts, and industrial assets.  

CROSSPATH also is a licensed asset manager specialising in TK-GK and TMK securitisation structures.

What turned your firm onto the ultra luxury segment in Japan?

We have observed in the past that the clients and our HNW friends from Asia could not find what they want - there have not been many options for international HNW individuals to find ultra luxury high quality residential properties in Japan.  In 2020, we had an opportunity to meet an Asian luxury residential focus fund through our lawyer’s introduction and together we entered into this sector.

Japanese developers tended to build their version of luxury which never really really hardly appealed to the international HNW.  These buyers tend not to compare property in the same city against each other but are used to comparing Tokyo to Manhattan, London, Singapore or Hong Kong - all markets that have strong track records in developing ultra luxury properties.

In general, domestically developed Tokyo luxury developments tend to focus on the common areas at the expense of the unit itself.  While the common areas are bespoke, unit layouts lacked the desired number of bathrooms, lacked in materials and fitting quality and even in ceiling heights.

Soft services are bare in domestically developed luxury properties as well.  All have a concierge however the domestically developed properties tend to limit their soft services to arranging a taxi or dry cleaning and accepting packages.  

Internationally developed ultra luxury brings party arrangement, direct airport pick up services, corporate jet memberships and all the other soft services the ultra HNW buyer is accustomed to with their overseas properties. 

How are your clients changing this current state of affairs?

Solutions are coming from overseas developers that have developed products in Japan which satisfy international standards.

These products’ pricing fall somewhere between JPY15-25mn per tsubo, which has been seen as "way too expensive" by the domestic market.  In hindsight, it could be argued that international developers might have been a little too early in bringing ultra luxury to Japan due to the higher pricing and lack of domestic understanding about what is included with that price point.

In the meantime however, prices for domestically developed new condos have risen.  Much of the higher grade, domestically developed residential in Minato and Shibuya wards are priced at more than JPY10mn per tsubo, closing the price differential.  

In one instance, half of the buyers for an ultra luxury property in Omotesando have been Japanese IT professionals so the domestic buyer is beginning to see the value that internationally developed ultra luxury is bringing as time moves forward.

Where do you see the future of this segment headed?

Once cross border travel becomes easier like it was in 2019, the international HNW buyer will return boosting adding to sales performance.

Given the last two years of domestically developed luxury property pricing catching up to internationally developed ultra luxury developments, the value proposition becomes clearer; you pay more but also get even more for Japan’s current inventory of ultra luxury.  

Once stronger sales track records become more established then the domestic developers, who once dismissed what the international developers were doing, will follow suit with their inventory.

Put all this together and Tokyo as well as Japan in general will look more like Manhattan, Beverly Hills, Los Angeles, Singapore and London in terms of the size of the ultra luxury segments of the residential real estate market.