Quick real estate news summary for the week

Office vacancies worsen, Nippon Building Fund makes a US$2 billion acquisition in Tokyo, and a potential extension to the home loan tax deduction. Below is a quick weekly summary of some of the recent goings-on in the Japanese real estate market.

Tokyo office vacancies climb for 7th month

The office vacancy rate across Tokyo’s five central business districts worsened for the 7th month in a row, reaching 3.43% in September. According to office brokerage Miki Shoji, this is the highest vacancy rate seen since March 2017 (3.60%). Small to medium businesses continue to cancel office leases or downsize, while larger corporations are halting expensive relocation plans. The average monthly office rent dropped for the second month in a row to 22,733 Yen per Tsubo (approx. 6,878 Yen per square meter). Shibuya’s vacancy rate was the highest of the 5 wards at 4.48%. It reached a record low of 0.84% in July 2018 and had been hovering around the 1% range until April 2020.

Mitsui Fudosan sells two buildings for 217 billion Yen

Mitsui Fudosan is selling its flagship Shinjuku Mitsui Building and the 13% compartmentalized ownership share in the Gran Tokyo South Tower to the Nippon Building Fund for 217 billion Yen (approx. US$2 billion). The transfer will take place in January 2021. The Shinjuku Mitsui Building was built in 1974 and has a total building size of 179,000 sqm over 55 floors. Each floor has its own unique postcode. With a height of 225 meters, it was the tallest building in Japan upon completion. It will be sold for 170 billion Yen. The Gran Tokyo South Tower is a 205-meter tall skyscraper adjoining Tokyo Station. It was designed by Helmut Jahn and completed in 2007.

Possible extension to home loan tax deduction

The government is considering extending the 13-year home loan tax deduction that was due to expire at the end of this year (or 2021 for certain cases). The program may be extended for another one or two years to account for the potential delays in moving into homes and apartments due to pandemic-related construction delays. It is also hoped that it will provide continued support for housing demand. The home loan deduction allows a borrower to deduct 1% of their remaining home loan balance, not exceeding 40 million Yen, from their income tax each year for up to 10 years (or 13 years for homes that were subject to the 10% consumption tax rate), provided that the home was moved-into by December 31, 2020. The maximum deduction works out to around 400,000 Yen per year.

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