Lenders, after suffering a decade of bad debts and loan losses after the property bubble burst in 1990, are looking to provide more loans for real estate investments as they bet prices will recover from a 36-year low.
Aozora Bank Ltd. plans to increase loans to more than a net of ¥100 billion from ¥30 billion a year earlier, said Fumihiko Hirose, general manager of real estate financing at the bank.
Orix Corp. is looking for investors to take over some $2 billion worth of existing loans this year, said Shoji Misawa, managing director of Orix's global coverage group.
"Bank lending is the most important indicator for the future of the real estate market," said Yoji Otani, an analyst at Deutsche Bank AG in Tokyo. "An increase in lending by banks to real estate is very good news for the property market."
Lenders are betting on a recovery in the property market after values reached the lowest in at least 36 years. Outstanding loans rose to ¥60.4 trillion in March from ¥58.5 trillion a year earlier, according to Bank of Japan data.
Commercial land prices fell 6.1 percent in 2009, the government reported in March. Values are at their lowest since the government began collecting comparable data in 1974.
Property prices in Tokyo are likely to hit bottom by the end of the year, said Tomoyuki Yoshida, Japan president of GE Capital Real Estate.
"Residential prices have reached bottom and prices for office buildings are close to bottom," he said at the Real Estate Investment World conference in Singapore this week.