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Rich Chinese to snap up property... in Japan?

Toyosu area of Tokyo, Japan, July 6, 2013.
Noriko Hayashi | Bloomberg | Getty Images
Toyosu area of Tokyo, Japan, July 6, 2013.

As Abenomics gives Japan's sluggish housing market a new lease on life, there's one group of investors looking to cash in on the market's resurgence: the wealthy Chinese.

"Chinese individual investors now appear to be dipping their toes in the water and considering Japan as the next destination, a wave that could be reinforced as capital controls in China are lifted," Freya Beamish, economist at Lombard Street Research wrote in a report titled 'Japan's House Party'.

(Read more: As Japan property rebounds, investors court more risk, push out of Tokyo)

Unlike Hong Kong and Singapore, hot spots for Chinese property investors in recent years amid government housing curbs at home, Japan's housing market has seen little demand from mainlanders, Beamish said.

"Japan is now benefiting from second round effects of Asia's overheated property sector," she said.

The average price of new condominium prices in the Tokyo Metropolitan area, for example, soared 12.2 percent in July on-year, according to the latest data from the Land Institute of Japan. That may reflect growing momentum in the country's housing market on the back of Prime Minister Shinzo Abe's economic policies, dubbed Abenomics, which have instilled confidence among residents.

While Tokyo is the world's third most expensive city to live in, according to Mercer, ultra high-end property in the Japanese city still looks like a bargain compared with the Hong Kong – which ranks sixth.

For example, a three-bedroom apartment in one of Tokyo's highest-priced luxury condominiums, The "Parkhouse Gran Chidorigafuch", costs $22,000 per square foot, according to Jones Lang La Salle. In Hong Kong, an apartment of the same caliber, such as "Argenta", costs almost $30,000 per square foot.

(Read more: Japan's Aeon REIT surges 8% on debut )

The interest in Japanese property comes at a time when tensions have escalated between Beijing and Tokyo over disputed islands in the East China Sea, where both countries have laid claim. The tensions led to violent protests across China last year, and led to Chinese consumers boycotting Japanese goods.

The developments don't seem to be putting off Chinese property hunters.

Overseas buyers made up a small portion of property sales in Tokyo at just 10 percent in 2012, much lower than other major markets such as New York and London at 31 percent and 63 percent, respectively, data from Jones Lang La Salle showed.

Olympic buzz

Donald Han, managing director at real estate consulting firm Chesterton Singapore, says China's high-net-worth individuals are particularly keen on Tokyo's residential property, which hasn't seen much interest from foreigners for a while.

"This is in light of the current upswing in the economy, and the fact that it [Tokyo] has been awarded the 2020 Olympics," Han told CNBC. "Chinese investors are looking into hotels as well, with their primary targets being first tier cities such as Tokyo, Osaka, and Yokohama."

(Read more: Demand up 50% on 'Abenomics,' says property head)

The Olympic effect is expected to drive a rise in Tokyo's residential property prices in the next few years, given the large-scale redevelopment of the Tokyo Bay area and expansion of the transportation system connecting the city and its surrounding areas, say market watchers.

Mei Wong, regional director and head of international residential properties for Jones Lang LaSalle Hong Kong, said inquiries regarding Japan properties have risen around 15 percent over the past three months, driven by the "promising returns on real estate investment amid a thriving property market benefitting from the Olympics effect and prospects of Japan's resurgent economy."

—By CNBC's Ansuya Harjani; Follow her on Twitter: @Ansuya_H

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.