Apartment development focusing on city centers as buyers shun suburbs

In Tokyo’s 23 wards, 4.98% of the land is being used for condominium buildings, an increase of 1.02 points over the past 10 years. The ratio is higher in central Tokyo, with some districts having a ratio of around 9%, signaling a clear shift towards living closer to the office and city center.

The report, released by Tokyo Kantei on October 31st, compiled data on Japan’s three major urban centers. In greater Tokyo, Shibuya ward was in top spot with 8.90%, up 1.46 points from 2007. Chuo ward, which includes the man-made islands of Kachidoki and Harumi in Tokyo Bay, increased by 2.03 points to 6.07%. This district has seen a number of high-rise condos built in recent years, especially in the bayside area, while the Nihonbashi district has seen an increase in small-to-medium sized residential developments.

Chiyoda ward, with a ratio of 2.87%, was the only district in Tokyo’s 23 wards below 3.0%. This is due to the extremely limited supply of land for residential development as much of the ward is made up of the Imperial Palace, Marunouchi/Otemachi business district, and many schools and parks. Land used for condos, has, however, doubled over the past 30 years.

In Minato ward, the ratio was 8.55%, up 1.79 points from 2007 and up 4.87 points from 1987.

Osaka’s Kita ward had a ratio of 5.77%, up 1.59 points from 2007.

Demand for condos in the city center is high due to growing demand from double-income households who are eschewing a suburban lifestyle and prioritizing a short-commute, as well as wealthy Japanese who have been buying condos in high-rises as a means of reducing their taxable estate for inheritance purposes. The average price of a new condo across greater Tokyo in September 2017 was 58,230,000 Yen, up 30% over the past 10 years. The rising cost of new condos has also helped to pull up the price of existing properties, with the average price of a 70 sqm second-hand condo in greater Tokyo reaching 35,550,000 Yen in September, an increase of 20% over the past 10 years.

The market for condos in outer suburban areas, however, is becoming dull. Tokyo’s Ome City, to the west, had a ratio of 0.67%, up just 0.07 points from 2007. Both Hachioji and Tachikawa cities had ratios below 2%. In the 1970s and 1980s, many families moved to outer suburbs or bed towns and were willing to put up with long commutes because prices in the city center were too high. These days, however, buyers are losing in interest in areas that don’t offer great transport access.

Back in 1970, 975,000 sqm of land in Tokyo’s 23 wards was used for condominiums. The number had almost tripled by 1975. Chiba Prefecture saw an explosion in the development of condominiums over the same period, going from just 58,577 sqm in 1970 to 1,784,478 sqm by 1975 — a 30-fold increase.

Sources:
The Nikkei Shimbun, October 31, 2017.
Tokyo Kantei, October 31, 2017.