Land prices continue to rise – MLIT LOOK Report

According to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) Chika LOOK Report for the fourth quarter of 2014 (October 1 ~  January 1), land prices increased in 83% of the surveyed locations across Japan. For the second quarter in a row, none of the locations saw a decline in land prices.

The Chika LOOK Report is a quarterly survey of land price movements of 150 commercial and residential locations across Japan. In the last quarter, 125 locations saw an increase, up from 124 locations in October 1, 2014. Two of those locations saw land prices rise 3 ~ 6% (the Toranomon area in Tokyo and the Ohori area in Fukuoka), while 25 locations saw no change in land prices.

In the greater Tokyo area, 90.8% of locations saw an increase in land prices, while 79.5% of locations in the greater Osaka area saw an increase.

Land price changes nationwide (% of locations that saw an increase, no change or a decrease in prices):

YearIncreaseNo ChangeDecrease
2012 Q114.7%53.3%32.0%
2012 Q222.0%54.7%23.3%
2012 Q322.7%58.0%19.3%
2012 Q434.0%49.3%16.7%
2013 Q153.3%34.0%12.7%
2013 Q266.0%27.3%6.7%
2013 Q371.4%22.7%6.0%
2013 Q481.3%14.7%4.0%
2014 Q179.4%18.0%2.7%
2014 Q280.0%18.7%1.3%
2014 Q382.7%17.3%None
2014 Q483.3%16.7%None

 LAND PRICE RISES IN TOKYO

RESIDENTIAL LAND
Bancho area, Chiyoda-ku: 0 ~ 3% rise

Sales for both brand new and existing condominiums in the Bancho area has been positive but future supply has been limited by a lack of development sites. As one of the leading luxury residential neighbourhoods in Japan, demand from both Japanese and foreign investors has been strong.

High demand from investors has pushed sale prices upwards while apartment rents remain relatively flat. As a result, rental yields, especially for family-type apartments, have been falling.

Minami Aoyama area, Minato-ku: 0 ~ 3% rise

Demand from wealthy buyers is very strong, particularly for luxury condominiums. Supply, however, is limited and it is a sellers market. There have been cases of second-hand apartments selling for higher than their original price when new. The supply of brand new apartments is also at a very low level.

Demand for rental apartment buildings from both J-Reits and private funds has been pushing up sale prices and pushing down yields. Vacancies in mid-to-high end rental apartments is starting to improve, but rents have remained relatively flat.

Daikanyama area, Shibuya-ku: 0 ~ 3% rise

The supply of residential property in the Daikanyama is at a severely low level, while buyers are forced to compete over the small supply. Prices have been moving upwards but there are some in the industry who believe they are nearing their peak.

Tsukuda, Tsukishima area, Chuo-ku: 0 ~ 3% rise

Since the Olympic announcement in 2013, both demand and prices have been rising in these areas, although the market does not appear to be overheating.  The relatively convenience to central Tokyo has provided a relatively stable rental market, which may continue to appeal to investors. Strong pricing, however, has slowed down some sales activity. The market for secondhand apartments over 70 million Yen is especially dull.

 

COMMERCIAL LAND
Marunouchi, Otemachi, Yurakucho, Hibiya areas, Chiyoda-ku: 0 ~ 3% rise

Most of the land in these areas is controlled by a small number of major real estate companies and there is very little data on recent transactions. These are prime office areas and office rates have been declining as the commercial property market recovers.

Supply is extremely limited in these areas and multiple bids are made on properties.

Ginza area, Chuo-ku: 0 ~ 3 % rise

Ginza is Japan’s leading retail area and stores have benefited from an increase in foreign tourists. Land price increases were a little slower from the previous quarter (3 ~ 6% rise), but demand for real estate remains high.

Roppongi area, Minato-ku: 0 ~ 3% rise

Rents in A-Class office buildings have been showing signs of increasing. There are expectations that land prices will continue to improve as various commercial projects continue to be developed in the area.

Toranomon area, Minato-ku: 3 ~ 6% rise

The Toranomon area saw a 3 ~ 6% rise in the fourth quarter of 2014, up from a 0 ~ 3% rise in the third quarter. The area continues to undergo some massive redevelopments, which have been spurred on by the completion of Toranomon Hills in 2014. The Tokyo Government also announced plans for a new station on the Hibiya Line which would have a direct connection to Toranomon Hills.

Sources:
MLIT, February 27, 2015.
The Nikkei Shimbun, February 27, 2015.