The “Lehman Shock” has had a major impact on wide swaths of the Japanese economy, ranging from exports to the US to the domestic housing market. One segment that was particularly hard hit was the resort market. Foreign investment funds that were driving new developments from Okinawa to Hokkaido dried up overnight leaving many to wonder if Japanese resorts had just been caught up in America’s housing/development bubble. The final verdict on this is still out, but there are some positive signs now that suggest that it wasn’t a mini-bubble and that Japanese resort developers are getting their shovels warmed up again.
For me the positive news started in February when I was able to stop in to visit some developers in Niseko catering to foreign buyers. They told me that land prices in Niseko didn’t drop much after the “Lehman Shock,” but this was because no one was buying or selling. The real estate market just hibernated for a year! These developers are happy now just to see transactions taking place as it means overseas investor confidence has returned. They are also busy quoting homes for the some of the new visitors who came to enjoy this winter’s phenomenal snow.
And speaking of land sales in Niseko, the biggest news this winter was the recent $67 million sale of the Niseko Hilton/Niseko Village development to Malaysia’s YTL Hotels and Properties. Citibank, the previous owner, has of course been in serious trouble since the “Lehman Shock” and has been selling assets around the world to help turn itself around. In addition to a luxury hotel in Saint-Tropez, France, YLT owns various resort properties across Asia and is looking to expand further. In Niseko Village they will get two hotels, two 18-hole golf courses, 155 ha of ski hill, and 462 ha of freehold land that Citibank already master-planned to encompass an entirely new commercial village center and a combined 1000 units of detached homes and condos. TYL president James McBride has also confirmed the company’s intention of modeling the development on chic resorts like Whistler, Aspen, Vail, and St. Moritz, Switzerland.
Over the years of watching what has been happening in Niseko, I have always maintained that the area would really begin to take off once Tokyo’s wealthy regained interest in it. During the bubble-era Niseko was one of many resorts that popped up only to fade away just as quickly leaving bad memories of bad assets. Perhaps not wanting to get burned again, the Japanese have been happy to leave all of the fun and excitement in Niseko to the foreigners. However, it seems that at least some of them have taken notice of the big developments being pushed ahead there now even after the “Lehman Shock.” The developers I met with told me that this winter was the first time that they had received inquiries from prospective Japanese clients and several are at advanced stages of negotiations.
While Niseko is the poster-child for current resort developments in Japan, good news is coming from other areas as well. Most notable was a report last week in the Nikkei Newspaper announcing the March 22nd opening of Resorttrust’s XIV Hakone Rikyu mountain resort hotel. Memberships for this luxury hotel that boasts hot spring water pumped into bathrooms of the higher-end suites were 82% sold out by February despite lingering concerns related to the “Lehman Shock.” Overall the company is seeing renewed demand for its resort properties from Japan’s wealthy especially since the fall in real estate prices has convinced many of them that it is a good time to buy. Resorttrust says that it will now focus on resort properties that are within a few hours’ drive of Tokyo, Nagoya, and Osaka.