Standard Land Prices dip for first time in 3 years

The nationwide standard land price, announced yesterday, dropped for the first time in three years. The average across all land uses recorded a 0.6% decrease in 2020, after a 0.4% increase in 2019. In 2018, the nationwide average increased for the first time since 1991.

This is the first land price survey to be carried out since the coronavirus pandemic took hold. As expected, the halt to inbound tourism and the current aversion to crowded locations has slowed the growth in commercial land prices. The nationwide average commercial land price went from 1.7% growth in 2019 to a 0.3% fall in 2020.

Of the 20,000 survey sites across the country, 60.1% recorded a fall in land prices – up from a 48% share in 2019. 21.4% of sites saw land prices increase. 

The most expensive land in Japan, located under the Meijiya Ginza Building in Tokyo, dropped for the first time in 9 years with a 5.1% decrease. The land is valued at 41,000,000 Yen/sqm (approx. US$36,000/sq.ft) in 2020.

Only 5 of the 47 prefectures saw residential land prices increase:

  • Tokyo: +0.2%
  • Miyagi: +0.1%
  • Fukuoka: +0.8%
  • Oita: +0.1%
  • Okinawa: +4.0%

According to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), there has been no evidence of any work-from-home or escape-to-the-countryside trend impacting residential land values at present. However, the rise in online shopping has heightened demand for warehouse and logistics facilities, with some industrial locations in Chiba’s Matsudo City and Saga’s Tosu City seeing land prices rise 11 ~ 12%. 

+9.1% in Toranomon

Within Tokyo, a commercial survey site in Toranomon 1 Chome was in top spot with a 9.1% increase in 2020. This is due to the massive redevelopment underway in the Toranomon district that is turning it into a high-rise business and residential hub. Last year this location saw an 18.1% increase. Asakusa fell out of the top rankings this year due to the lack of tourists. The bar and club district of Kabukicho in Shinjuku saw commercial land prices drop 5.0% as patrons avoided drinking establishments. 

Average residential land prices in Tokyo’s 23 wards increased by 0.2% after a 2.5% increase in 2019. A site in Akasaka 1-14-11 (under the Homat Royal condominium) reported the highest increase, thanks to its proximity to the Toranomon area redevelopment. It had a standard land price of 4,720,000 Yen/sqm in 2020, up 4.2% from last year. It is the most expensive residential land location in Japan.

Akasaka 1-14-11. The most expensive residential land in Japan.

The Denenchofu garden suburb was a poor performer, with the 5 Chome area seeing the largest drop in land prices. This neighborhood is seeing its popularity decline over the years, with the younger generation less interested in large and expensive homes located in inconvenient locations. Even with the recent telework trend, buyers may be expanding their outlook to more distant locations but are still preferring apartments that are close to stations that have their own mini commercial hubs.

Down and out in Nagoya

Sakae 3 Chome in downtown Nagoya saw commercial land prices drop 8.9%, making the 4th largest drop in the country. The pandemic has hit Nagoya’s real estate market hard, with transactions stalling and office and retail demand disappearing. Hotels in the city remain closed, while notable tenants make their exit. Despite the ongoing constructions for the maglev Chuo Shinkansen train, land on the eastern side of Nagoya Station dropped 5.2%, with land on the western side seeing a 7.0% drop. 

+38% in Okinawa

The location with the highest increase nationwide was the resort island of Miyakojima in Okinawa where commercial land prices increased by over 38.9% while residential land prices jumped 37.3%. On the flip side, the traditional Okuhida onsen village in Gifu recorded the steepest decline in commercial land prices with a 9.3% drop. For residential land, Hirayama in Hino City, Tokyo, performed the worst with an 18.4% fall in 2020. The district was designated as a landslide disaster hazard area in March 2018, with over 800 sites given yellow and red hazard zone designations.

Hokkaido saw land prices fall for the 29th year in a row with a 0.5% decrease in 2020. Nevertheless, the ski resort area of Niseko managed to outperform the prefecture average, with a commercial location seeing a 32.0% increase this year. The rate of growth has slowed from a record 66.7% increase seen in 2019. That survey location has seen land prices increase by almost 300% since 2015.

About Standard Land Prices:

Standard Land Prices (kijun-chika) are one of two annually reported land valuations used in Japan, the other being the Government Assessed Land Values (chika-koji). Standard Land Prices are based on a survey date of July 1, while Government Assessed Land Values are based on a January 1 survey date.

The Government Assessed Land Values cover just 1,627 survey sites nationwide with a focus on urban areas in town planning zones, while the Standard Land Prices cover 21,675 survey sites of all types and varieties across Japan, including 3,500 sites located outside of town planning zones with little-to-no development potential and limited opportunities for price increases.

Standard Land Prices tend to follow chika-koji prices, although with less volatility. During the bubble economy, chika-koji prices increased by more than 20% at one point, while the Standard Land Prices increased by around 10%. During the most recent mini-bubble in 2007 and 2008, government assessed land values were in the positive territory, while Standard Land Prices remained negative.

Neither land valuations represent the true market value of a piece of land and should not be used to decide what a property is worth on the open market. However, they are useful as a general guide and to indicate market trends.

Sources:
The Nikkei Shimbun, September 29, 2020.
The Mainichi Shimbun, September 29, 2020.

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