Apartment price to income ratio worsens

According to research by Tokyo Kantei, the average new apartment price in Japan is 6.27 times the average annual income. This is an increase of 0.26 points from 2010, indicating an increased difficulty in purchasing homes.

The average price to income ratio for a secondhand apartment (10 years old)  was 4.32 (0.26 points higher than 2010).

The average annual income in Japan in 2011 was 4,370,000 Yen, which is 20,000 Yen lower than in 2010. While the average annual income in Japan in 2011 fell 20,000 Yen from the previous year to 4,370,000 Yen, the average price of new and old apartments had increased.

In greater Tokyo, the price to income ratio for new apartments was 7.91 times annual income (down 0.03 points from 2010). In the Kinki region, the ratio was 7.55 times, and in Chubu it was 6.08 times.

For secondhand apartments, the price to income ratio in greater Tokyo was 7.35 times, 4.56 times in the Kinki region, and 4.03 times in Chubu.

The highest ratio in Japan for new apartments was Tokyo city with a ratio of 9.43 times, and the lowest was Kagawa Prefecture with new apartments only 3.98 times annual income.

One of the reasons for the increase in the average nationwide apartment prices is due to a lack of new development in the disaster hit Tohoku areas. This mean the supply of new stock was limited to central areas such as Tokyo, where typically high property prices pushed figures up.

This is the second year in a row where the price of secondhand apartments has been more than 4 times the average income. The average apartment price of 18,540,000 Yen was 720,000 Yen higher than 2010 figures. With the supply of new apartments being limited to central metropolitan areas, demand in the surrounding areas has helped to push up prices of secondhand apartments. Although the price of brand new apartments has been falling, the fall in income levels has been steeper.

The average price of a new apartment in Tokyo city fell 1,030,000 Yen to 57,630,000 Yen in 2011. In Kanagawa Prefecture, the average price fell by 4,220,000 Yen to 41,470,000 Yen.

The price to income ratio was calculated by dividing the average price of a new 70 sqm (753 sqft) apartment by the average annual income.

Price to income ratio in other countries according to the Demographia International Housing Affordability Survey (2011):
– Hong Kong: 12.6 times
– Australia: 5.6 times (Sydney: 9.2 times)
– New Zealand: 5.2 times
– UK: 5.1 times
– Canada: 3.5 times (Vancouver: 10.6 times)
– US: 3.0 times

According to Demographia, a ratio over 5 is considered “severely unaffordable”.

Sources:
The Asahi Shimbun, May 8, 2012.
Searchina, May 8, 2012.
Demographia International Housing Affordability Survey (PDF File)

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