According to the quarterly LOOK Report published by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), land prices in Japan’s major cities in the second quarter of 2018 have increased in 95 of the 100 surveyed locations. This is the highest share in the history of reporting, beating a previous record of 91 locations seen in the previous quarter.

A gradual trend of land price growth continues across major cities. In particular, commercial land around transport hubs in regional centers has seen land prices go from no movement to a slight increase. In Tokyo, residential land prices in Bancho, Tsukuda / Tsukishima and Kichijoji have also shifted to an increasing trend.

Overall, 82 locations saw 0 ~ 3% growth, 13 saw growth of 3 ~ 6%, while the remaining 5 saw no change in land prices. 2 locations in the Tokyo metropolitan area saw growth of 3 ~ 6% – Omotesando and Shibuya. 3 locations saw no growth – Tachikawa, Shinagawa and Toyosu.

Property prices are being supported by positive office market conditions, large-scale redevelopment projects that are reinvigorating neighborhoods, demand for apartments in convenient locations, and foreign tourists that are boosting spending in retail zones and contributing to demand for hotels.

TOKYO LAND PRICES

BANCHO AREA, CHIYODA-KU (RESIDENTIAL) +0~3%

Bancho went from no change in land prices in the previous quarter to a 0 ~ 3% increase this quarter. Sales of high-end apartments to domestic buyers remain healthy, with some properties seeing an increase in resale prices. This neighborhood is primarily driven by demand from owner-occupiers rather than investors, with limited transactions for investment-type apartments. Market rents remain flat, resulting in declining yields. Land is in short supply, while developers remain keen to source development sites.


MINAMI AOYAMA, MINATO-KU (RESIDENTIAL) +0~3%

The fashionable low-rise neighborhood on the eastern side of Omotesando Station, the Minami Aoyama address is one of Japan’s leading residential brand-name locations. Resales in relatively new apartments have been maintaining high prices. The high-end rental market has been seeing an upwards trend in rents, although transactions and occupancy rates have been soft. The long-term popularity of this neighborhood with buyers and residents does mean that the supply of apartments for sale is low, thereby helping to support gentle price growth.


TOYOSU, KOTO-KU (RESIDENTIAL) 0%

Located on a man-made island in Tokyo Bay, this district has seen the rapid development of high-rise apartments containing hundreds of units per building. Demand for new construction has remained strong since the announcement of the Olympics in 2013, creating a build up in apartment prices, although these prices have since peaked. The price of new and existing apartments may be reaching the upper limit for buyers in this neighborhood with expectations that transactions will decrease in the future, while further price increases may not occur. Toyosu’s land prices also flatlined in the previous quarter.


SHINAGAWA, SHINAGAWA-KU (RESIDENTIAL) 0%

A waterfront district with good transport links to Haneda Airport via Shinagawa Station. A new station is planned just north of Shinagawa Station, with large-scale redevelopment of the former train yards to follow. Temporary over-supply conditions remain for large new apartment tower projects with sale prices peaking out. Rental demand, however, remains healthy. Shinagawa also saw no change in land prices in the previous quarter.


SHIBUYA, SHIBUYA-KU (COMMERCIAL) +3~6%

The massive redevelopment projects centered around Shibuya Station are said to have heralded the return of the so-called ‘Bit Valley’ IT hub that Shibuya was once famous for in the late 1990s. The station area is seeing new hotels, office and retail go up in coming years. Office vacancy rates are sitting close to zero, while the new office coming online in the near future has already been snapped up by major IT firms.  The Shibuya area also saw 3~6% growth in land price in the previous quarter.


OMOTESANDO, SHIBUYA-KU (COMMERCIAL) +3~6%

A short walk north-east of Shibuya Station lies the Omotesando district, a mecca for Japan’s fashionistas. Strict zoning rules mean there are very few opportunities for dense, high-rise development like in neighboring Shibuya. The low-rise retail along the main Omotesando Avenue shopping street has almost no supply due to strong demand from tenants, resulting in very few transactions. Rents have maintained high levels. This district is also close to the Olympic Stadium and it is expected that rents will remain high for the near future.


TORANOMON, MINATO-KU (COMMERCIAL) +0~3%

The demolition of older buildings near Toranomon Hills has already started to make way for several high-rises planned by Mori Building. A new subway station is also planned for the Hibiya Line which will eventually provide direct access to Toranomon Hills. Construction of the Toranomon-Azabudai district development is also scheduled to kick off from March 2019. What was once a quiet, under appreciated commercial district filled with small homes and pencil-buildings will eventually become a hub for office and hotels. This type of transformation is expected to see an increase in office rents along with demand from institutional investors, supporting continued growth in land prices.

Source: MLIT, August 17, 2018.

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