A major residential development deal in Sydney’s inner west represents the start of “the second foray" of Japanese investors into the local market, Sydney-based EG Funds Management says.

When Japanese news outlets announced the fund manager had partnered with Japanese home builder, Daiwa House, and Sumitomo Forestry on its 300-apartment Flour Mill development in Summer Hill, Morgan Stanley analysts heralded the deal as the return of the Japanese developer to Australian property.