Asia’s leading alpine real estate market, Niseko looks set to enter a new property cycle as the main indicator being its once-lofty condominium demand eases off the accelerator. The gold standard of the marketplace for the past five years has been centred firmly in Hirafu, but fast appreciating property prices, scarcity of sites and a mounting inventory of incoming supply is pushing developers to other nearby ski-oriented locations.
The effect of the push outwards from Hirafu is being felt in nearby areas such as Higashiyama – Niseko Village, Annupuri, Hanazono, and Moiwa, given lower underlying land values in these locations. C9 Hotelworks research has revealed mounting transaction volumes in residential land and land and house packages in projects such as Hanaridge, Odin Hills, Hanacreek & SnowDog Chalets.
Taking a step back and evaluating the property cycle, the new set of land buyers represent an increase in speculation-oriented investors versus the traditional lifestyle buyers who in the past have been end-users. This again points to a maturation of the real estate market and a possible reset. Another prime observation of C9 Hotelworks newly released Niseko Property Review is the emergence of a growing number of international hotel brands including the highly-successful Park Hyatt Hotel and Residences Hanazono, and upcoming projects led by luxury mainstays Aman and Ritz-Carlton.
Despite the ongoing entry of larger global chains, a reality-check surfaced recently when the Hyatt House in Hirfu was reflagged to the Thai group Chatrium highlighting the unique skill set required of operators of mixed-use hotel residences. This is a stark reminder that Niseko is vastly different from a traditional resort marketplace and that condominium-type hospitality products are inherently more complex to operate versus single-owner hotels.
Looking forward, given the broader market focus on resort-grade properties and increasing shift towards rental yields as the sector grows, tourism fundamentals are expected to play a key role. A new 20-year Kutchan Town Urban Planning Masterplan process is underway that will weigh heavily on the area’s future development.
Taking a view of the all-important airlift factor, regional direct flights to Sapporo’s New Chitose airport pre-crisis have risen sharply, this remains an important barometer for real estate in the future. There is potential disruption of routes to Thailand, Australia and other Asian gateways which have in the past induced demand to Niseko’s property sector. It’s likely a retraction in the region’s airline industry will mute many leisure-driven destinations.
Another key dynamic is the continued upward pressure on construction rates. While the build-up to the Olympics and speculation on massive integrated-resort casino projects is the backdrop amidst escalating cost, there is little reason to believe a significant downwards adjustment will come into play, thus keeping intense pressure points on developer’s margins.
Our view of Niseko remains positive in the long-term and that market values will hold given unique fundamental of the relatively small size of buyer debt and discretionary nature of the property holdings. That said, the sheer cost of development may restrain investors from undertaking significant integrated developments and year-round resorts, which is what is needed to take the destination into the next stage of its evolution. Ultimately, Niseko has to create a more balanced support infrastructure and the time to do that is now!
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