Showroom closures see new apartment supply hit 47-year low

The supply of brand new apartments released for sale across greater Tokyo in June dropped 31.7% from last year to 1,543 units. This is the 10th month in a row to see a year-on-year drop, although it is a four-fold increase from the units supplied in May.

The average apartment price in Tokyo’s 23 wards was 79,620,000 Yen, up 3.8% from last year. The average price per square meter was 1,282,000 Yen, up 1.7% from last year. The contract ratio was 67.3%. Apartments priced over 100 million Yen had a contract ratio of 69.4%.

First half of 2020

Supply for the first half of 2020 reached the lowest level seen for the first half of a year since reporting began in 1973. Just 7,497 new apartments were released for sale, down 44.2% from the first half of 2019. In 1992, the half-year supply hit a low of 10,959 units due to a slump in demand following the crash of the asset bubble a few years earlier. 

This time around, however, things are different with the pandemic causing developers to temporarily shutter showrooms and halt sales activity. April saw 686 new apartments supplied, while May saw just 393 apartments. Unlike the early 1990s, prices are not budging. The average price of a brand new apartment increased by 8.7% from 2019 to 66,680,000 Yen in the first half of 2020, reaching a new record high.

A researcher from the Institute says there is demand for apartments priced over 100 million Yen, with conditions likely to remain stable for central Tokyo locations. The average price in Tokyo’s 23 wards increased by 7.1% to 81,900,000 Yen.

It is almost certain that the annual supply in 2020 will fall below 30,000 units to a level not seen since the post-asset bubble. 

Sources:
The Real Estate Economic Institute, July 15, 2020.
The Nikkei Shimbun, July 15, 2020.

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