Standard land prices in Tokyo increase for 5th year in a row, while nationwide commercial prices increase for first time in 10 years

The Ministry of Land, Infrastructure, Transport and Tourism (MLIT), announced the Standard Land Prices on September 19th. In the Tokyo metropolitan area, land prices across all uses increased by 3.0% from last year, recording the fifth consecutive increase in land prices. Commercial land prices in Tokyo’s 23 wards increased by an average of 5.9%, after recording a 4.9% increase in 2015. Shibuya Ward was in top place with 8.6% growth (6.6% in 2016).

The survey site under the Ginza Owaricho Tower in Ginza 6 Chome saw a 21.8% increase in land prices over the past 12 months.

Nationwide, standard land prices were down 0.6% for residential land, but up 0.5% for commercial land. This is the first time in 10 years to see an increase in commercial land prices.

Kyoto’s tourism boom drives commercial land price growth

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Price growth in Tokyo more subdued than the 2007 mini-bubble

Earlier this year, rosenka tax values at a section of ultra-prime commercial land in Tokyo’s Ginza district increased by 26% from the previous year to a record high of 40,320,000 Yen per square meter, exceeding the previous high of 36,500,000 Yen/sqm in 1992 and causing some to warn of an impending bubble and overheating of the property market in the nation’s capital.

There is valid cause for concern in some sectors of the investment-property market due to potential over-construction and over-lending to landowners to build small blocks of ‘apaato’ type rental flats in suburban areas with low rental demand.

But are current conditions mimicking previous bubbles?

This time around Japan is getting more foreign tourists than ever before, boosting revenues for both hotels and retails shops, making the increase in commercial real estate values much more pronounced than the residential market which relies more on real domestic demand.

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Land in Ginza sells for 43 million Yen/sqm

ginza-3-land

In August, railway operator Hankyu Corporation acquired a block of vacant land in Ginza for 13.5 billion Yen (approx. 132 million USD). The purchase price worked out to be approximately 43,700,000 Yen per square meter (40,000 USD/sq.ft), or around 4,500,000 Yen per buildable square meter (4,100 USD per buildable square foot) based on a potential 3,000 square meter building.

The 308.88 square meter (3,323 sq.ft) corner block of land is located alongside Namiki Dori Avenue. It was originally the site of the 10-storey Tokyo Chusha Building, which had a total floor area of 3,000 square meters (32,280 sq.ft). The building was demolished in 2015.

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