In Hokkaidō, which is the northernmost region of Japan, there is a town called “Niseko,” and recently, investors are flocking to invest in ski resorts there. Niseko is famous for its high-quality powder snow. It is a joy to ski on Niseko snow, yet the prices for ski resort real estate there are actually quite reasonable, at least for now.
Niseko ranks only 31st in the world for ski resort land prices. This is according to Savill’s annual “Ski Report.” Savills is a British company, and its Ski Report ranks properties in France, the US, Switzerland, Austria, etc. The price per square meter for ski resort land in Niseko (as of this October) is only €8,139 per square meter, which in US dollars, is about $9,060.17 at the current exchange rate.
Many of the properties are condominiums. For example, one development, which is brand new, has condominiums with five bedrooms, walls made of wood, big windows, ceilings of higher-than-average height, spiral staircases, two floors each, and the ability to entertain up to 14 dinner guests at a time in the dining room. However, the most striking feature, if one actually goes there, is the beautiful view of Mt. Yōtei. Mt. Yōtei is like the Mt. Fuji of Hokkaidō.
The aforementioned condominium complex was completed one year ago. According to a local professional who deals with the selling of these properties, six of the nine condominiums have been sold. The prices range from ¥300 to ¥600 million. That is about $2,742,600 to $5,485,200 in US dollars. The investors are from many countries. Only about 10% of buyers are Japanese, with the other 90% being foreign. This is because there are no restrictions on foreigners buying land or buildings in Japan. Many of the investors are from other Asian countries. One notable group is investors from Hong Kong.
Prices in Niseko are still low by world-class ski resort standards, but have been increasing lately. Kutchan District had a 66.7% price increase this year, according to data from the Hokkaidō government. This is, for the fourth year in a row, the part of the country with the fastest increase.
Courchevel 1850 is a location in the French Alps, which is considered one of the greatest ski resorts in the world (comparable in quality to Niseko). There, prices average €23,030 per square meter (US$25,638.15). Niseko’s prices are currently less than 36% of the prices in Courchevel 1850. Aspen is another very expensive ski resort town, which ranked 2nd in Savill’s ranking, and is also much, much more expensive than Niseko.
Global average returns for ski resorts are only about 5%. However, in Niseko, the average returns are about 7%.
One real estate broker in the area claims he has a contacts list of foreign clients with over 5,500 names on it. They include executives, investors, even celebrities.
Niseko has numerous bed-and-breakfasts on the second storeys of buildings. There are cafés and shops on the ground floors. Many signs in Niseko are only in English because there are so many foreign tourists, skiers, etc. there.
Not everyone is happy with the rising real estate values and Niseko’s place in the world of skiing. One Indian restaurant owner lamented that he has to pay ¥400,000 a month in rent for his restaurant. This is in spite of the fact that most of the year, there are few tourists/skiers. If his restaurant relocates, someone will quickly grab the real estate he was using for the same or even a higher price. He would not be able to return if he attempted to relocate and it went unsuccessfully.
Other local residents have also complained. Their rents are too high, they say, and their town has become unaffordable for them to live.
Koya Miyamae is a financial professional at SMBC Nikko Securities. He worries that the town has too much of its livelihood based on tourism/winter sports. He says that this exposes Niseko to both geopolitical risk and currency risk. If the yen were to become much stronger, it could hurt the local economy disproportionately.
However, for investors, this may be a great opportunity. Niseko is a major skiing destination for the rich, yet the prices per square meter are cheaper than many comparable places in Europe, and returns on investment (ROIs) average 7%, versus 5% for most such ski resorts around the world. Will foreign investors continue to be able to buy properties and profit off the situation, or will the locals get legislation passed to limit further foreign investment, limiting the lucrative investment to those who had the foresight?