But real estate stocks are rising again after the Japanese government indicated it is considering extending lines of credit to struggling developers and property companies.
Shares in Tokyu Land Corporation, a developer with properties in western Tokyo, soared 16% after the news was announced as did shares in Mitsui Fudosan Co., the nation's largest property developer.
Shares in other property companies including Pacific Holdings Company, Mitsibushi Estate Company, Japan's second biggest developer, and Creed Office Investment Corporation, also soared.
'Views are divided on whether emergency loans from the government will help the real estate industry, but at least the unending tide of bad news has been checked, prompting a share rebound,' said Masanori Ikunaga of the Sumitomo Mitsui Asset Management Company.
Because of the global recession banks in Japan have reined in lending to builders while housing demand has slumped. So the news that the government may give loans of up $22 million to small and midsize developers that have been unable to refinance through banks is welcome.
But confidence in the Japanese property market is low. Prospect Asset Management, the Honolulu-based investment fund specializing in Japanese property, is cutting staff by about 40% after slumping markets wiped out $1.5 billion of assets and most of the firm's hedge fund.
And the banks are simply not lending. Japan's top four lenders, Mitsibushi UFJ Financial, Mizuho Financial Group, Sumitomo Mitsui Financial Group and Resona Holdings have cut commercial real estate lending by almost 770 billion yen in the six months to September, compared with the end of March, according to the latest figures.