Real estate market in Hokkaido: The number of tourists is increasing, and private lodging, which is expected to be more profitable than residential properties, is doing well.

Niseko real estate News

The presence of minpaku in Hokkaido’s real estate market is increasing. Against the backdrop of a recovery in customer numbers that fell due to the coronavirus pandemic, inquiries to private lodging companies are increasing, and newly built condominiums designed for private lodging operations are also appearing. As existing hotels continue to be under pressure and housing construction costs continue to rise, they are attracting attention as an investment destination that promises higher returns than residential properties.

Kenji Kawamura, president of Massive Sapporo (Sapporo), which operates private lodging businesses in and outside of Hokkaido, including Sapporo, Furano, and Kyushu, said, “Since the beginning of this year, we have received inquiries about starting new private lodging businesses, and the number of inquiries has increased by about 3.5 times compared to the previous year. “There is,” he reveals. The number of properties managed by the company, which was around 200 rooms at the end of 2019, temporarily decreased to 160 rooms due to the impact of the coronavirus pandemic. However, the number of rooms began to increase around fall of last year, when entry restrictions were eased and the number of foreign tourists visiting Japan began to recover in earnest, and the number of rooms has now reached 210, which is higher than before the coronavirus.

In February of this year, major housing construction company Daiwa House Industry (Osaka) built a new 14-story condominium building at Minami 3 Nishi 6, Chuo-ku, Sapporo. The biggest feature is that private lodging can be operated from residences on the 2nd to 12th floors. The company also built a similar property in the same ward in 2019.

Vacation rentals are often repurposed from existing properties, and it is rare to find a property that is designed to be used as a vacation rental from the time it is built. A representative from the company’s Hokkaido branch said, “As construction costs and property prices rise, the ability to effectively utilize them when you are not available will be a new added value at the time of sale.”

According to the Sapporo City Health Center, the total number of nights spent in private lodging in the city from April to July this year was approximately 38,000 days. Although it has not reached the level of 2019, when it reached about 70,000 days, the pace of recovery has accelerated since 2021, when it hit bottom. The number of facilities has increased from 1,263 at the end of June of the same year to 1,343 as of the end of August this year.

Trends in the number of vacation rental days in Sapporo City

According to the prefectural government, the number of tourists in Hokkaido in fiscal 2022 was 42.29 million, an increase of 21% from the previous year. With the lifting of the ban on group tours from China this year, the occupancy status of accommodation facilities in Hokkaido continues to improve, and accommodation rates are also on the rise.

TOC (Sapporo), which operates a private lodging business in the Sapporo and Niseko areas, said that in August, the occupancy rate of its popular properties, such as those around JR Sapporo Station, exceeded 90%, and the properties remained nearly full. The average room price per person per night before the coronavirus outbreak was 4,000 to 5,000 yen, but it has now risen to around 8,000 yen. Daisuke Takeyama, executive officer, analyzed that, “As hotel prices have risen, the market price of private lodging has also risen, and in many cases, higher profits can be expected than in rental housing operations.” There is also a movement of investors buying a used rental apartment building and earning money from private lodging to cover the cost of rebuilding it.

Condominium and apartment construction costs are skyrocketing in Hokkaido due to rising material prices and labor costs. A real estate official in Sapporo points out, “Both condominium sales and rentals are becoming unprofitable for actual demand, and I think more and more homes will be turned into hotels to appeal to high-priced tourists.”

Hokkaido News Papar2023.9.12

Niseko real estate company CEO’s perspective

In the development plan for the former Seibu site near the south exit of JR Sapporo Station, the height of the building has been lowered due to rising construction costs. In recent years, construction costs have continued to rise. If you have the know-how to manage a private lodging property, you can get a better yield than buying a condominium and renting it out on a monthly basis. Both condominium sales and rentals are becoming unprofitable for actual demand. New investment methods and second-hand demand are expected to further increase.