For those interested in historic real estate data, Tokyo Kantei has released a graph of new apartment prices across Japan between 1956 and 2018. 

In 1990, Japan was at the peak of an over-inflated asset bubble, with prices more than doubling over the five-year period between 1985 and 1990. The average price of a new apartment in Tokyo’s 23 wards reached 5,179,000 Yen per tsubo (1,567,000 Yen/sqm), a 14.0% increase from the previous year. Across greater Tokyo, the average price increased by 20.6% over 12 months to 3,435,000 Yen per Tsubo (1,039,000 Yen/sqm). In the Kinki region which includes Osaka, average prices saw a year-on-year increase of 27.1%. New developments were located far and wide, from the city center to the outer suburbs with limited transport.

Property prices entered into a continual decline in the 1990s before hitting a low in 2002. This is what is referred to as Japan’s lost decade. In 2000, the average price of a new apartment in Tokyo’s 23 wards was 2,295,000 Yen/tsubo (694,000 Yen/sqm). Development began to focus more in the city center, particularly within the Yamanote Loop Line. The manmade islands on Tokyo Bay, including Kachidoki and around Koto-ku saw a sharp increase in supply with several large-scale high-rises. 2006 and 2007 saw a mini-bubble emerge, although prices later dropped with the onset of the global financial crisis. 

In the past few years, average new apartment prices across greater Tokyo have returned to the 3,000,000 Yen/tsubo range not seen since the 1980s bubble. However, the rate of growth this time around has been much milder than during the bubble. Since 2012, prices in Tokyo’s 23 wards are up an average of 33%, much more subdued than the 130%+ growth seen over a five-year period in the late 1980s.

Development in recent years has taken the form of redevelopment projects around station-front areas, with investors becoming very active in the market. High-rise condos on the manmade islands have been bought by investors at unprecedented levels. Record-low interest rates have offset price increases, allowing homeowners to afford more expensive apartments. 

Pricing for new vs. existing construction

In 1990, there was only a 1% difference in the average price of brand-new construction and apartments that were 10 years old in Tokyo’s 23 wards. In 2018, there was a 30% premium on the average price of new construction. In Saitama Prefecture the premium is 55%, and in Chiba Prefecture the difference is a staggering 72%. This is due to the underlying land value that heavily influences the value of a building over time. Apartments in areas with higher land values will have a higher residual market value even as the building ages.

Source: Tokyo Kantei, July 31, 2019.

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