Supply of new apartments shrinking as developers struggle to secure land

In the midst of a recovering property market, Japan’s top real estate developers are struggling to find suitable plots for residential projects, causing supply to shrink and sales volumes to fall.

The total value of real estate available for sale by the country’s top five developers as at the end of June 2016 was 3.107 trillion Yen (approx. 28 billion USD), down 0.4% from March and the first time in 9 quarters to record a decline. Increasing land prices and intense competition has meant that even though demand for real estate remains high there are fewer projects on offer.

Mitsui Fudosan, Sumitomo Realty & Development and Tokyu Fudosan Holdings all saw a decrease in the total value of real estate, including projects still under development, on sale as at the end of March 2017. Mitsubishi Estate reached a peak at the end of September 2016.

Since the Bank of Japan introduced monetary easing measures in 2013, developers have had easy access to cheap financing. This led to a quick surge in new projects and a sharp increase in the supply new apartments offered for sale. The jump in volume, however, seems to be short lived due to the highly competitive market conditions as well as a very limited supply of land in urban centers.

According to the Japan Real Estate Institute, there were 29 publicly announced apartment development sites offered across Japan in the first half of 2017, the lowest level seen since the first half of 2009.

Mitsui Fudosan is expecting to release 3,900 new apartments for sale in 2017, down 25% from last year. The company typically supplies 4,000 ~ 5,000 condominiums each year, but has reported recent difficulties in obtaining development sites.

Source: The Nikkei Shimbun, September 1, 2017.