Japan skifields projects buried

[url=http://business.theage.com.au/business/japan-skifields-projects-buried-20090301-8lgh.html]Original Article[/url] [quote] THE Commonwealth Bank is moving to cut its exposure to Japan's frothy property market by suddenly freezing a highly popular loan product that targeted the development and sale of holiday homes and resorts on Japan's northern ski slopes. One prominent property developer, who declined to be named, has described CBA's decision last week to suspend its Japan Snowfields Property Loan as a "bombshell" that would cause many residential developments to be shut down. It comes as banks around the world scrutinise their commercial property lending books in the face of a spike in bad debts. Last month, CBA booked a $1.6 billion first-half charge due to its problematic loan book. It warned it was increasing vigilance over property and financial services given the souring economic climate. More than 7 per cent of the CBA's loans book is tied up in commercial property. Insiders told BusinessDay that CBA's Tokyo office was in favour of maintaining and even expanding its Japan Snowfields product to include off-the-plan developments, but this was overruled by head office in Sydney. Already the second stage of a Japanese ski resort development has been placed on hold as developers brace for an exodus of leveraged Australian investors. The introduction of the product around a year ago triggered a rush by Australian property developers and buyers keen to pick up holiday homes in Niseko, a region on the northern Japanese island of Hokkaido. It was advertised using pictures of a samurai-sword-wielding warrior standing amid the lush white powder snow of the ski fields. Denominated in yen and with a minimum loan size of ¥15 million it had a lending ratio of 50 per cent. An investor could buy a small home 200 metres from the snow for about ¥45 million. It was an immediate hit and helped propel ski property values in Niseko by more than 35 per cent in one year. But in an email sent to clients and obtained by BusinessDay, CBA said that after meeting its initial goal of 300 loans earlier than expected, the product would be suspended during "a review of the total exposure that CBA is comfortable with in this market". The review is expected to take roughly two months. A spokesman for CBA did not return a call yesterday. The fall of the Australian dollar against the yen has also hurt the sector, almost doubling the price of a property on the Japanese slopes for Aussies. David Tarantini of OzNiseko, a subsidiary of a Queensland property developer that completed a 31-unit development in the region, said: "It's disappointing (CBA) have decided to stop and take a closer look, but they have been nothing but good for what we've been doing and what we intend to do up there, and I do believe at some time, I can't predict when, they will be back in the game. "It's too good a place." Colin Hackworth, president of Nihon Harmony Resorts, said buying activity in Niseko had started slowing last year and that property developers who had based their model on leveraged Aussies should be concerned. [/quote]