Japan's real estate fervour could lose its mojo all too quickly

IN countries with growing populations, rising incomes and falling real interest rates, property is usually a winning bet.

Strike Japan out on two of three of those counts. Its population is both ageing and shrinking. The 1.9 per cent rebound in the first quarter aside, the economy is hardly booming. But thanks to massive money printing, real interest rates are negative. And chiefly as a result of that, Japanese real estate has been the biggest source of returns for Asian property investors for at least two years.

Japanese property funds returned 21.5 per cent last year and 20.7 per cent in 2014, making them the best performers among Asian real estate funds, according to data from the Asian Association for Investors in Non-listed Real Estate Vehicles. Chinese property funds, by contrast, had negative returns last year, while all funds tracked by ANREV gave average returns of 11.7 per cent.