On the first of this month, the National Tax Agency announced the 2016 roadside land prices. The roadside land prices are the value of land facing major roads nationwide per 1m². Every year in early July they are announced, and serve as a basis for that years inheritance or gift tax calculations.
According to this year's announcement, the national average has risen by 0.2% from last year. This is the first time there has been an upward movement since the Lehman shock 8 years ago in 2008. Of the 47 prefectures, 14 saw a rise from last year, and the remaining 33 fell. This is only slightly more than last year (Rising: 12, Falling: 35), and while the rise is increasing, the polarisation of city and countryside areas is still continuing. The highest rise is Tokyo at 2.9%. This marks a 3 year consecutive increase. Aside from the increased demand for retail stores and hotels due to an increased number of foreign visitors, there is also the rise in office rents. Ginza 5 Chome located stationery store "Kyukyodo", which has held the national top spot for roadside land prices for 31 consecutive years, saw an increase of 18.7%, or 32 million yen per 1m². With this the pre-2008 Lehman shock price (31.84 million yen) has been passed, and it is now heading towards the 1990 real estate bubble era peak price of 35.5 million.
Second and third places are in the Tohoku area with Miyagi at 2.5% and Fukushima with 2.3%, both showing impressive growth. With Sendai, Miyagi is showing an acceleration in city redevelopment, and in Fukushima it appears that since the nuclear power plant incident in 2011, the demand for housing by evacuees has been pushing up roadside land prices.
Aichi prefecture has seen a 4 year consecutive rise, the four prefectures surrounding Tokyo (Tokyo, Kanagawa, Chiba, Saitama) and Osaka a 3 year consecutive rise, and Kyoto and Okinawa a 2 year rise, with Hokkaido seeing a turnaround from last years decrease to an increase this year. Since major tourist destinations are generally seeing increases, it seems that foreign visitors to Japan have a big influence on the increase of roadside land prices. In this case, the exchange rate trends are clearly a worry. Since the high yen strikes directly at foreign visitors' wallets, it is possible the number of visitors and amount they consume will both decrease depending on the currency market. In May the number of foreign visitors to Japan showed growth with an increase of 1.89 million (15.3%) over May last year (According to the National Tourist Office, who also announced the following), but when compared to the January to March period (January: 52% increase, February: 36.4% increase, March 31.7% increase), the rate of increase has dropped significantly. This is clearly not unrelated to the sudden appreciation of the yen starting in mid-February.
The land assessments, along with the official land prices announced in March, are only published once a year, meaning we need to wait a whole year to see the next set of figures. However, the currency and foreign visitor trends seem to be something that require close attention.
Jul. 15, 2016