New apartment price-to-income ratio drops for first time in 7 years

According to Tokyo Kantei, the average price of a brand new apartment across Japan was 7.59 times the average annual income in 2016, down 0.07 points from 2015 and the first drop reported in 7 years.

The price-to-income ratio across greater Tokyo was 10.68, down 0.31 points from 2015, and the first decline seen in five years. An increase in wages coupled with a stabilization of new apartment prices has been the cause behind the lower ratio. In fact, the number of prefectures across the country that saw an increase in the price-to-income ratio decreased from 36 in 2015 to 19 in 2016.

In the Tokyo metropolitan area, where the luxury apartment market is booming, the ratio increased for the 3rd year in a row with a new apartment costing 11.46 times the average annual salary.

Kyoto is the least affordable place in Japan for new apartments

The ratio in Kyoto Prefecture was 12.94, up 2.17 points from 2015. Demand for luxury apartments in the historic city from out-of-town buyers has helped to push up new apartment prices. This ratio is likely to drop in next year’s survey as developers have been switching their focus to hotel projects in the city center, pushing residential developments to the outer suburbs.

The least affordable locations for new apartments across Japan are:

[1] Kyoto Prefecture:

Ratio: 12.94 (+2.17 points from 2015)
Avg. new apartment price: 58,470,000 Yen (+23.7%)
Avg. annual income: 4,520,000 Yen (+3.0%)

[2] Kanagawa Prefecture:

Ratio: 11.70 (no change)
Avg. new apartment price: 59,320,000 Yen (+0.8%)
Avg. annual income: 5,070,000 Yen (+0.8%)

[3] Tokyo:

Ratio: 11.46 (+0.16 points)
Avg. new apartment price: 72,650,000 Yen (+2.5%)
Avg. annual income: 6,340,000 Yen (+1.1%)

[4] Akita Prefecture:

Ratio: 10.48 (no past data)
Avg. new apartment price: 36,380,000 Yen
Avg. annual income: 3,470,000 Yen (+3.0%)

[5] Saitama Prefecture:

Ratio: 10.23 (-0.10 points)
Avg. new apartment price: 47,160,000 Yen (-1.0%)
Avg. annual income: 4,610,000 Yen (no change)

Akita Prefecture made the list in 2016 after getting its first condominium development in over 6 years.

At the peak of Japan’s asset price bubble, the average price of a brand new apartment in the Tokyo metropolitan area reached 18.12 times the average annual income. In 1990, the average price of a new 70 sqm apartment was 107,660,000 Yen, or 1,538,000 Yen/sqm. Before the bubble, the average price-to-income ratio in 1985 was 8.08.

Second-hand apartments

In 2016, the average price of a second-hand apartment across Japan was 5.25 times the national average annual income, an increase of 0.07 points from 2015.

The Tokyo metropolitan area was the least affordable place in the country for a second-hand apartment with a ratio of 9.13, up 0.56 points from 2015. The average price of a second-hand apartment in 2016 was 57,890,000 Yen, up 7.8% from 2015, while wages increased by 1.1%.

Although Kyoto Prefecture was the least affordable location for new apartments, it was ranked 4th nationwide for second-hand apartments with a ratio of 7.05.

Okinawa Prefecture was in second place with a ratio of 7.80, up 0.76 points from 2015.

About the data:

  • Second-hand apartment prices are based on the average assumed price of a 70 sqm, 10-year old apartment as at 2016.
  • Incomes are estimated based on data provided by prefectural governments.

 

Source: Tokyo Kantei, July 31, 2016.