An Introduction to Real Estate Related Topics

An Introduction to Real Estate Related Topics

Today we would like to look at some real estate related topics that have been announced recently.

● A nationwide trend for rising land prices has become clear.

On the 3rd of July, the National Tax Agency announced the 2017 roadside land prices (as of the 1st of January". The roadside land prices are the value of routes (roads) that make the basis for inheritance and donation taxes, and are one of the three major prices alongside the public land prices and standard land prices, calculated by the Ministry of Land, Infrastructure and Transport.

In 2017, the average nationwide roadside land price was up by 0.4%. In 2016 this rise had continued with a rise of 0.2%, marking the first clear price rise tend since the Lehman shock in 2009.

However, there is considerable variation. The largest rise compared to the previous year goes to Miyagi prefecture at 3.7%. In the opening of the Tozai subway line and the accelerated redevelopment of the Sendai station area, following the Great East Japan Earthquake Miyagi's Sendai city area has gained attention as a logistics hub, and investment from companies has increased. Further, there is also the fact that prices are rebounding from a drop caused by the 2011 East Japan Great Earthquake.

The number two spot goes to the Tokyo metropolitan area with a rise of 3.2%. In Tokyo, areas around major stations such as those around Tokyo, Shibuya and Shinagawa stations, are seeing accelerated redevelopment. In addition to this, the demand for commercial facilities and hotels continues to stay strong with a backdrop of increased foreign visitors to Japan, likely pulling prices up further. In Okinawa, plans for hotel facilities continue to be drawn up, primarily in areas popular with tourists, and it is said that prices are rising at the stage of rezoning. Aside from these areas, Kyoto, Osaka, Fukuoka, Aichi and Hokkaido have all seen rises since last year. Aside from Iwate prefecture, all those that have seen price drops since last year have seen smaller ones this year.

The keywords shared by all prefectures that are in positive figures are "redevelopment" and "foreign visitors". In addition, local cities can add "new construction of logistics facilities" to this list. In some parts such as Tokyo's Ginza, the highs achieved during the early 1990's real estate bubble have been surpassed, leading to the possibility of a "return of the bubble" being discussed, but large scale think tanks and economists claim that "while during the bubble price rises were due to unrealistic transactions such as land being resold numerous times, the current trend for price rises is based on actual demand, making it unlikely we will see another major drop like the bubble bursting". The previously mentioned "redevelopment", "foreign visitors" and "construction of logistics facilities" underpin the demand, and the supply-demand balance is unlikely to collapse in any major way.

● Demand for second-hand condominiums outside Tokyo is gradually expanding.

According to TOKYO KANTEI, who offer real estate information, prices for second hand mansions in the metropolitan area (Tokyo, Kanagawa, Chiba, and Saitama) in May of 2017 were up by 0.3% from the previous month at 35.72 million yen. While in Saitama and Kanagawa prefectures things appear to be on the up, in the 23 wards of Tokyo a small level of up and down variation has continued since the summer of 2016, leading to a so called "top stop", where a high price is maintained. However, the central six wards (Chiyoda, Chuo, Minato, Shinjuku, Bunkyo and Shibuya) have seen small but consistent rises of between 0.1 and 0.5% for 4 months since February. Looking at these trends, we can see that the demand for used condominiums is gradually shifting from the 23 wards of Tokyo to suburbs with relatively good access to the city centre, such as Yokohama and Saitama cities.

In addition, the same TOKYO KANTEI announced that rent prices for condominiums is down by 0.8% (2,633 JPY calculated by square meter) from last month. While Tokyo is gradually falling from its November 2016 peak, Kanagawa Saitama and Chiba are seeing mild rises, or at least maintaining the same level, showing that demand is spreading from Tokyo to the other metropolitan areas.

● Prices continue to rise for investment-use condominiums.

In early June, Fast Logic Inc. who run real estate investment site "Rakumachi", announced the market trends for real estate. The average price of 11,223 investment-use condominiums newly posted o the site was up my 80,000 JPY compared to the previous month. Further, surface yield also increased by 0.06 points to 7.73%. As for investment classified condominiums, this makes the 4th month to month rise since the start of 2017, and there are indications that the decline in surface yields has slowed. However, while investment-use condominium prices continue to rise in the long term, the surface yield seems to be gradually declining.