Japan’s regional land prices increase for first time in 28-years

Nationwide land prices rose for the fifth year in a row this year, but hard-hitting effects of the novel coronavirus could put a swift end to Japan’s real estate recovery. 

According to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), the nationwide ‘chika-koji’ assessed land price saw a 1.4% increase in 2020. This was a 0.2 point improvement from 2019’s 1.2% increase. 

Residential land prices nationwide saw a 0.8% increase. This was the third year in a row to see positive growth. The three major cities saw 1.1% growth, while Tokyo’s 23 wards saw 4.6% growth.

Akasaka home to most expensive residential land for 3rd year running

The most expensive residential land in Japan was the survey site under the Homat Royal condominium in Akasaka, Tokyo. This site is across the street from the Hotel Okura South Wing and just up the street from the US Embassy. The assessed land price in 2020 reached 4,720,000 Yen per square meter (approx. US$4,070 per square foot), up 8.8% from 2019.

Akasaka has taken the crown as the most desirable address for wealthy apartment buyers, with its proximity to the major redevelopments around the Toranomon District and the business district in Roppongi a major appeal for executives looking to live closer to work. 

The Homat Royal condominium in Akasaka sits atop the most expensive residential land in Japan for the third year in a row.

The nationwide average commercial land price rose by 3.1% in 2020 after seeing 2.8% growth in 2019. This was the fifth year in a row to see an increase. Japan’s three major cities of Tokyo, Osaka and Nagoya saw a 5.4% increase in commercial land prices, while the four regional cities of Sapporo, Sendai, Hiroshima and Fukuoka saw an 11.3% increase. 

The most expensive commercial survey site is the land under the Yamano Music Building in Ginza, Tokyo. This land was valued at 57,700,000 Yen per square meter (approx. US$49,770 per square foot) in 2020, up 0.9% from 2019. This land reached a previous peak of 38,500,000 Yen per square meter during the height of Japan’s asset bubble in 1991, before dropping to 14,800,000 Yen per square meter in 2002.

For the first time since 1992, the other regional areas (excluding Sapporo, Sendai, Hiroshima and Fukuoka) saw an increase with 0.3% growth reported this year. This growth may be attributed to the increase in tourism to regional parts of the country from foreign visitors.

The biggest increases were seen in foreign tourist hotspots, such as the area around Asakusa Station in Tokyo which saw 34% growth in 2020. A residential survey site in Nagano’s ski resort town of Hakuba recorded a 20.2% increase, while a commercial site saw a 15.2% increase. 

Niseko, Hokkaido, continued its winning streak with some of the highest increases in land prices. Two residential survey sites saw 44% and 30.6% growth, while a commercial survey site saw 57.5% growth. The rate of growth has slowed ever-so-slightly from 2019 where residential sites saw 50% growth and a commercial site saw 58.8% growth.

Coronavirus concerns

Japan’s commercial land prices have been steadily rising over the past several years, and much of that may be attributed to the country’s boom in foreign tourism. In 2019, 31.9 million foreigners visited Japan, up 282% from 2012 and the highest in history. Where foreign tourists go, land values grow, with districts in Ginza, Kyoto and Niseko seeing sharp rises in property prices.

The recent international flight restrictions and a severe drop in foreign visitors to Japan from February have had a sudden and catastrophic impact on the tourism industry. The Japan Tourism Agency has estimated that foreign tourist arrivals in February 2020 dropped 58.3% from last year to 1.08 million visitors. Visitors from China dropped 87.9% to 87,200 after the Chinese government implemented a ban on overseas group travel in late January.

If these conditions continue for the mid-to-long term, it is likely to be reflected in future real estate values. The potential for the onslaught of a global recession and weak consumer sentiment could also weigh heavily on land prices as investors hold off on real estate purchases while these uncertainties linger.

Sources:
TV Asahi, March 18, 2020.
NHK, March 18, 2020.

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