By Micheal Davenport
What Doesn't Break You Will Make You Stronger
It’s February 2008 in Niseko, and the number of new investors rivals the amount of snow. Land prices in central Hirafu have doubled since December and quadrupled overnight in a subdivision just outside the village; real estate agents are selling land and property quicker than they can update their files. Niseko is a global buzzword.
Fast-forward to now, one catastrophic world financial crisis later and a yen 30 percent stronger against the heavily invested Australian dollar. Does this mark an end to the runaway development boom in Niseko? Well, strangely enough, no. Here on the ground, new projects are still being conceived and completed, land values are stable and local companies are positive this is nothing but a blip on the long-term plan.
Why so? The well-publicized arrival of major international figures such as Hilton, Capella Hotels and PCPD as well as finance from NAB and the Commonwealth Bank indicate there is too much investor interest in Niseko for it to do anything but succeed long term. And that’s not forgetting the original reason for Niseko’s success: an average of 15 meters “champagne” powder snow each winter season and a perfect summer climate.
There is no denying some of the financial fallout will land on Niseko; the hardest hit will be those with yen loans tied to foreign collateral and investors who now need to find 30 percent more cash to pay for their property. However, this financial crisis will give Niseko a shake-up and help mature the market beyond its infancy.
What will change? Since 2006, the investor demographic has been slowly shifting from Australia to East Asia, and this will be further accentuated in the current climate due to the strength of the yen against the Australian dollar.
There have been many inquiries from Australian investors wishing to cash in on the current exchange rates and consequently, for the savvy investor, there are going to be some fantastic bargains available in the next 12 months and another chance to buy in at 2006 prices. When the global markets settle down, Niseko will be in a good position to continue its development with a new mix of international investors.
This winter will be a challenging season for many of the local companies who are still working with financial models based on previous growth. However, provided the necessary adjustments are made quickly, as they were during the last few years’ expansion, they will continue to see good returns.
Now fast-forward to next winter. It’s another exciting snow season, but will there be new developments and investment opportunities in Niseko? It’s as guaranteed as the snow.
Michael Davenport is the Managing Director of Niseko Consulting, a company specializing in independent real estate advice and locally sourced listings. Michael has three years experience in Niseko and has lived in Japan since 2002. Web: www.NisekoConsulting.com.