Land prices up in 83% of locations – MLIT LOOK Report

The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) announced the land price movements across Japan for the third quarter in 2014 (July 1 ~ October 1).

According to the Chika Look Report, 124 locations (83% of the total) saw an increase from the previous quarter, and 26 locations (17% of the total) saw no change. For the first time since this survey began in late 2007, none of the 150 survey sites saw a decrease in prices. Of the 124 locations to see a price rise, 122 locations saw prices rise between 0 ~ 3%, while 2 locations (Ginza and Shinjuku 3 Chome) saw prices rise between 3 ~ 6%.

Strong investor demand caused by monetary easing, as well as demand for apartments in areas with convenient access have helped to sustain the price growth.

In greater Tokyo, 58 locations (89% of the total) saw land prices increase, while the remaining 7 locations (11%) saw no change. In greater Osaka, 30 locations (77%) saw prices increase, wile 9 locations (23%) saw no change. In Nagoya, all 14 locations saw prices increase.

Land price changes nationwide (% of locations that saw an increase, no change or a decrease in prices):

Year Increase No Change Decrease
2012 Q1 14.7% 53.3% 32.0%
2012 Q2 22.0% 54.7% 23.3%
2012 Q3 22.7% 58.0% 19.3%
2012 Q4 34.0% 49.3% 16.7%
2013 Q1 53.3% 34.0% 12.7%
2013 Q2 66.0% 27.3% 6.7%
2013 Q3 71.4% 22.7% 6.0%
2013 Q4 81.3% 14.7% 4.0%
2014 Q1 79.4% 18.0% 2.7%
2014 Q2 80.0% 18.7% 1.3%
2014 Q3 82.6% 17.3% None


Bancho area, Chiyoda-ku: 0 ~ 3% rise

In the Bancho area, new apartments have seen strong demand while future supply is extremely limited by a lack of available redevelopment sites. As a result there have been a number of transactions of older office building which are being demolished to make way for new residential projects. There are some concerns that the rising construction costs could mean that developers may want to pay less for land in order to keep projects profitable. This could put downwards pressure on land prices. The costs could be covered by high-end projects in this area, however, so land prices may continue to see a slight rise.

Many of the existing family-type apartments in the Bancho area are in much older buildings that do not meet current earthquake-resistant standards. Demand for newer family-type apartments, therefore, is exceedingly high. Despite land price rises, apartment rents have remained flat.

Minami Aoyama area, Minato-ku: 0 ~ 3% rise

Minamiaoyama is the most in-demand location for wealthy buyers in the Minato-ku area. A number of large transactions have taken place since the announcement of the 2020 Summer Olympics and improving market conditions. Demand from both locals and foreign buyers is currently far exceeding supply and it is a sellers market. Recent price rises have not been matched by rental prices and yields are at relatively low levels. Development sites are rare and new apartment supply is limited. Buyers are turning their attention towards the resale market, which has left the supply of secondhand apartments at very low levels.

Daikanyama area, Shibuya-ku: 0 ~ 3% rise

With a severe shortage in development sites, houses and apartments, sellers are starting to increase their asking prices, but they are getting close to reaching a price ceiling. Prices have also been pushed up by buyers fighting over a limited number of properties. Demand from foreign investors is starting to fall as prices are starting to exceed actual demand. It is expected that there may be a limit on further price rises in this area.

The gap between asking prices and prices buyers are willing to pay for personal residences is widening. Demand from investors, however, is strong and buyers are not concerned about the age of a building.

As one of the leading high-end residential neighbourhoods in Tokyo, landowners are holding onto their properties in anticipation of prices rising further. This has led to an extreme shortage of available land.

Takanawa area, Minato-ku: 0 ~ 3% rise

Condominium apartment prices have been showing a gradual trend upwards and development sites have been transacting at higher prices. One transaction of note was the sale of the former Seiko Residence in Shirokane for 30.5 billion Yen (279 million USD at the time) to Singapore-based City Developments. At a price of over 1,800,000 Yen/sqm, this was a record high price for development land in the area. Investor demand for rental apartment buildings remains strong while yields remain fairly flat. Rental demand for luxury apartments from both expats and local tenants is strong and rents are starting to show a gradual rise. This is helping to push up land prices.

The supply of both new and secondhand apartments is limited. As stock levels are dwindling, so too are transaction numbers. With the high demand and short supply, resale properties are selling at high prices with shorter listing times and with fewer discounts. New apartments are being bought up by private investors and real estate companies with the goal of re-selling them when the building is complete. This means consumers who missed out on pre-sales will have to pay more for the apartments when they are offered for resale.

Tsukuda, Tsukishima area, Chuo-ku: 0 ~ 3% rise

Following the Olympic announcement in late 2013, new apartment sales have been strong in the bayside area of Toyosu, Tsukishima and Harumi as these islands will host the Athletes Village and some sporting events. The rise in construction costs, however, are causing developers to be cautious as project costs are reaching levels where they may no longer be profitable. Some development sites are still being actively sought out by developers which has been pushing land prices upwards.

Many of the secondhand apartments listed for sale are being sold by owners who are moving into brand new apartments in the same area. As secondhand apartments are being listed at prices similar to brand new ones, secondhand apartments are no longer being seen as ‘relatively cheap’. As a result, resale transactions are slowing down and the gap between asking prices and prices that buyers want to pay is widening. The price ceiling in this area is around 70 million Yen, and apartments priced above this range are taking longer to sell.


Marunouchi, Otemachi, Yurakucho, Hibiya areas, Chiyoda-ku: 0 ~ 3% rise

Office vacancy rates have been falling and rents are showing signs of rising. This is Japan’s prime office district and demand from corporate investors is extremely high, yet supply is very low. As a result, properties are sold via a competitive bidding process with a number of prospective buyers. In October, Singapore’s sovereign wealth fund GIC acquired the office portion of Pacific Century Place Marunouchi for 170 billion Yen.

The vacancy rate in buildings with an average monthly office rent of 9,000 Yen/sqm is dropping, while new leases on offices with monthly rents over 12,000 Yen/sqm are increasing.

Ginza area, Chuo-ku: 3 ~ 6% rise

With a strong market for luxury goods and an increase in the number of foreign tourists, the retail sector in Ginza has been performing well. Demand has been strong not only for buildings alongside Chuo Street, but also for buildings of all sizes and ages in back streets. Older buildings are being purchased for future redevelopment potential. Given the high market values in this area, the increase in construction costs has been relatively small and easily absorbed.

Omotesando area, Shibuya-ku: 0 ~ 3% rise

Omotesando is one of Japan’s prime retail locations. With a short supply in available commercial listings, investors are often outbidding one another to secure a property, thereby lowering yields. Retail rents for street-level stores fronting onto Aoyama Dori Avenue are showing a gradual rise, while rents for floors on upper levels and in back streets are expected to recover.

Shibuya area, Shibuya-ku: 0 ~ 3% rise

This area has been in the spotlight since the commencement of the large-scale redevelopment of Shibuya Station and its surroundings. The development is not expected to be fully completed until 2027, but demand is already high in anticipation of future improvement to transport, facilities and the environment. Demand has been strong with a number of acquisitions of older buildings in anticipation of future redevelopment.

This area has always had a shortage in available supply and even older and smaller buildings in less convenient locations are popular with investors. As transaction prices show a gradual rise, yields have been falling. Many buildings operate at near-full occupancy, while prospective tenants for some of the prime buildings are forced to make competitive bids when renting office space.

Roppongi area, Minato-ku: 0 ~ 3% rise

Demand has been strong for S-Class buildings (see definition below), with average rents in A-Class and above on the increase. Ongoing office redevelopment in this area means that land prices have been rising. While the future completion of these buildings may cause an over-supply, rental demand for large buildings in prime areas is expected to remain strong. Office rent in lower grade buildings, however, has not shown any sign of improvement and is pulling down the average.

Toranomon area, Minato-ku: 0 ~ 3% rise

With the opening of the No. 2 Arterial Ring Road and Toranomon Hills, real estate companies have been aggressively seeking investment opportunities in this area. A number of redevelopment projects are planned for this area, including the redevelopment of Hotel Okura and the addition of a new station along the Hibiya Line. Office demand is high, with many larger buildings close to fully leased. This has meant that the recently added floorspace has not affected vacancy rates. Office rents have only shown an upwards trend in new and large-scale buildings, while the average for the area has not changed.


  • S-Class Building: Total building floor area over 66,000 sqm, floor plate over 1,650 sqm, less than 11 years old, considered to be ‘landmark’ buildings with the best facilities.
  • A-Class Building: Located in prime commercial areas within central Tokyo’s five wards, total building floor area over 33,000 sqm, floor plate over 660 sqm, less than 21 years old, ceiling heights over 2.6m, 24hr use.

Source: MLIT, November 28, 2014.

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