New apartment prices in greater Tokyo at 22-year high
According to the Real Estate Economic Institute, 4,222 brand new apartments were released for sale in greater Tokyo in July, up 20.5% from the previous month but down 20.4% from last year. This is the 6th month in a row to see a year-on-year decline in supply. Developers are taking caution to limit supply amidst a drop in demand following the increase in consumption tax and a steep rise in construction costs. According to Nomura Securities, the average cost of construction in May 2014 was 187,000 Yen/sqm - the highest level seen since 1993.
3,532 apartments were sold, making the contract rate 83.6%. This is 7.1 points higher than the previous month and 2.1 points higher than last year.
The average new apartment price was 55,320,000 Yen, up 14.5% from the previous month and up 7.9% from last year. This is the first time that prices have exceeded 55 million Yen since November 1992.
The average price per square meter was 771,000 Yen, up 12.9% from the previous month and up 6.1% from last year.
1,533 apartments in 18 high-rise buildings (over 20-storeys) were offered for sale, up 241% from the previous month but down 1.8% from last year. The contract rate was 93.5%.
Approximately 2,500 new apartments are expected to be released for sale in August. The institute has revised its estimated downwards and now expects between 46,000 ~ 48,000 apartments to be supplied in 2014. Read more
Residential yields and vacancy rates in Minato-ku - August 2014
According to real estate listing site Homes, the average gross yield on an apartment in Minato-ku in August was 5.3%, up 0.1 points from last month but down 0.4 points from August 2013. The average gross yield across Tokyo was 7.0%, down 0.1 points from last month and down 1.1 points from last year.
The vacancy rate remains unchanged at 9.9% in Minato-ku and 11.0% across Tokyo.
The average asking price of a secondhand apartment in Minato-ku was 792,143 Yen/sqm as of August 1, up 0.79% from last month. The average asking price for land was 1,276,970 Yen/sqm, up 2.1% from last month.Read more
Suginami-ku may soon have powers to forcibly widen roads
The local government in Suginami-ku, Tokyo, is considering amending local regulations which would give them the powers to carry out the road widening and street levelling on privately owned setback land. If the plans are approved, this would be the first local government in Japan to have these legal powers.
Approximately 30% of the roads in Suginami are less than 4 meters wide and pose a hazard to the local community in the event of a disaster, such as an earthquake, as emergency vehicles cannot navigate the narrow roads and lane ways.
Under the Building Standards Act, owners of buildings that front onto a road less than 4m wide are required to shorten their block land in order to widen the road when the building is redeveloped.
Suginami’s local government currently provide financial assistance to help owners with the cost of removing any obstacles such as walls and gates in order to complete the required setback. Although landowners are required to make the setback portion of land level with the road, many owners leave the raised curbing as is with garden beds and other objects still blocking vehicle access.
Inheritance tax changes, not Abenomics, behind recent rise in apartment rent?
According to the Real Estate Economic Institute, the average price of a brand new apartment in greater Tokyo was 49,290,000 Yen in 2013, up 8.6% from the year before and higher than the average of 47,750,000 Yen seen during the ‘mini bubble’ in 2008. Sales of apartments priced over 100 million Yen have also increased, as has investment from domestic and foreign funds.
Apartment rent, however, has not shown the same trajectory. According to Tokyo Kantei, the average monthly rent of a family-sized apartment less than 5 years old in Tokyo’s 23 wards was 4,007 Yen/sqm in June 2014, up 9.2% from the previous year. For apartments between 6 ~ 10 years old, the average monthly rent was 3,461 Yen/sqm, showing almost no change from 12 months prior. For apartments aged between 21 ~ 30 years old, average rents dropped by 2.6% to 2,496 Yen/sqm, while rents for apartments over 30 years old had fallen by 0.5% to 2,616 Yen/sqm. Masayuki Takabashi, a researcher from Tokyo Kantei, said that the recent increase in the consumption tax rate has reduced the real income of consumers, which has made conditions difficult for landlords who want to achieve strong rental returns.Read more
Apartment price to income ratio worsens nationwide, but improves in Tokyo and Osaka
According to Tokyo Kantei, the average price of a brand new apartment in Japan in 2013 was 6.59 times the average annual income (up 0.06 points fro 2012), while a second-hand apartment (10 years old) was 4.58 times times the average income (up 0.02 points from 2012).
The rise in apartment prices has outpaced the increase in average income. The average annual income across Japan increased by 3.85% from the previous year to 4,320,000 Yen in 2013.
Meanwile, the average price of a 70 sqm second-hand apartment in Japan was 19,800,000 Yen in 2013, up 4.38%. The average price of a brand-new apartment nationwide was 28,620,000 Yen, up 5.07% from the year before.
In greater Tokyo (Tokyo, Kanagawa, Saitama and Chiba Prefectures), the price-to-income ratio of brand new apartments was 8.80 times (+0.06 points). The ratio for second-hand apartments actually fell 0.05 points to 6.07 times. Read more