The average price of a brand-new apartment released for sale across greater Tokyo in the first half of 2019 (April ~ September) was 60,060,000 Yen, up 4% from last year. This is the first time in 28 years to see the average price exceed 60,000,000 Yen for the first half of a year. In 1991 it was 61,370,000 Yen.

With construction costs remaining high, there is little room for developers to lower costs. Buyers are also increasingly put off by new apartment prices, with the contract ratio dropping to an 11-year low of 64.6%. Unsold inventory at the end of September was 6,780 units, up 730 units from one year ago. The contract ratio for the month of September was 56.8%, down 9.7 points from last year, while the average apartment price was up 16.6%. In Tokyo’s 23 wards, the contract ratio was 54.4%.

The supply of new apartments dropped 22% from last year to 11,996 units. This number is close to the record low of 10,357 supplied in the first half of 1992. Developers are limiting supply while demand remains weak. 

A booming tourist industry has seen intense competition amongst developers to build new hotels around central Tokyo. Land that was once bookmarked for residential is now more appealing as a hotel development, creating upward pressure on land prices and limiting the supply of new housing. 

The asset bubble in the late 1980s saw a surge in the development of high-end condos, pushing up average prices to record highs. Following the collapse in the early 1990s, land prices dropped severely resulting in new apartment prices bottoming out at 39,680,000 Yen in the first half of 2000. A high-rise boom in central Tokyo from 2003 onwards saw prices recover for the next few years, with further growth seen since 2013. 

Source: The Real Estate Economic Institute, October 17, 2019.

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