Real estate statistics: A jumble of strengths and weaknesses Is the real estate market going to reach stability?

Real estate statistics: A jumble of strengths and weaknesses
Is the real estate market going to reach stability?

Apparently, the real estate market in the metropolitan area is heading towards stability. If we look at the real estate indicators and statistics announced in the past 1 or 2 months, there is a mixture of weaknesses and strengths.

For example, the prices of existing condominiums. According to Tokyo Kantei, who deal with real estate information, the average price (per 70㎡) in Tokyo in April fell by 0.6% compared to the previous month, to 35.6 million yen. March also saw a small decrease of 0.1%, meaning there was a 2 month consecutive decrease in prices. However, in Tokyo the 0.6% decrease of March was offset by a 0.5% increase in April. Proportionally, Kanagawa and Chiba prefectures seem to have seen bigger drops, making for an overall drop in the metropolitan area.

On the other hand, according to the "Urban Area Price Index" for March 2017, announced by Japan Real Estate Institute (JREI), Tokyo has 68.2 points (Calculated relative to a point score of 100 for the end of March 2000). This is a rise of 0.6 points compared to September of 2016. Incidentally, the nationwide all-use average is 50.1 points. This is the first time it stopped falling for 25 years.

In addition, At-Home, which deals in real estate information services, announced the trends for residential rental properties on the 25th. According to them, the number of contracts signed in the fiscal period of April 2017 was 19,461 which is a 5.8% decrease from the same month last year. This makes it the 14th consecutive month to see a decrease in the number of contracts. In particular, the number of contracts signed for newly built condominiums saw a large decrease at 14.2%. In the past 1 or 2 years, the prices of condominiums have stayed high, which may be leading to the decrease. However, both the number of contracts and their prices for newly built apartments have increased. The former for 2 consecutive months and the latter for 4.

Let's continue a little more. According to a survey at a building group who work on Building Group Co,.Ltd., the vacancy rate for offices in April 2017 (In Tokyo's 5 main wards) was 0.004 points down compared to the previous month, at 4.74%, showing a minimal amount of improvement. Similarly, Miki Shoji Co.,Ltd., which deals with information about the office market, indicated that the same 5 wards experienced an average vacancy rate of 3.39%, 0.21% down from the previous month, a relatively big improvement. This shows that there is variation depending on who conducts the survey.

In addition to this, looking at the "Real Estate Industry Status Index*" (announced by The Land Institute of Japan, as of April 1st 2017), we see that while "residential and the residential land sale business" is seeing big improvements, the real estate distribution industry is deteriorating, among other trends that seem to show that judgement on the condition of the overall industry is divided.

In addition to the indicators and statistics we introduced here, recent data also gives a strong impression of strengths and weaknesses combating each other. Of course, there is a wide variety of statistics associated with real estate, meaning that while the overall market may be growing it is possible for bad indicators to appear, or for positive ones to be found by looking at specific time periods or areas even if the entire market is in a bad condition.

However, the appearance of so many positive and negative figures at one time, can certainly be called a rare case. In that sense, the overall real estate market may be teetering back and forth between good and bad.

One thing that can be said, is that domestic real estate operators' motivation to invest is still strong. In a questionnaire by JREI about "Investment stances over the next year" given to asset management, developer, real estate brokerage, and leasing companies, 88% answered that they were going to "actively pursue new investment". This was a 3% increase compared to the same questionnaire in October 2016. On the contrary, only 9% answered that they would "refrain from new investment for the time being".

Obviously a good market situation cannot be maintained simply by having a strong supply side. Nonetheless, at least as far as the results of the questionnaire show, development of the real estate market does not seem likely to stop.

*Real Estate Industry Business Condition Indicator - Japan Land Research Institute (General incorporated Foundation) created an index based on a questionnaire. This questionnaire is conducted on all major real estate projects in major cities nationwide. It varies from -100 to +100 points, with zero being the midpoint. Many interpret positives as indicating business conditions are improving, with a minuses being indicators of them worsening.