For the first time in five years, more than half of the newly completed condominiums in Sapporo City remain unsold. Although sales were strong in 2013, buyers are becoming increasingly priced out of the new apartment market due to rising prices. These prices have been underpinned by higher construction costs, including raw materials and labour, which means that developers are either unable or reluctant to reduce the end prices offered to consumers.
Over 90% of Hokkaido’s new condominiums are located in Sapporo. In 2015, 51% of units in condominiums that had already been completed remained unsold by developers.
In the summer of 2013, a looming hike in consumption tax caused a spike in last-minute buying activity resulting in unsold inventory of just 0.6% of completed condominiums. It wasn’t long before construction costs began to rise due to reconstruction efforts in Tohoku and preparations for the 2020 Tokyo Olympics. Land prices, too, have been pushed up by an improving economy and a booming tourism industry. These factors have resulted in unavoidable increases in the price of new condominiums.
The average price of a brand new condominium released for sale in Sapporo in March 2016 reached 42,810,000 Yen, an increase of 30.9% from last year. In 2015, the average price went over 40 million Yen for the first time, exceeding prices last seen during the bubble. Some areas in Sapporo saw average prices reach 50 ~ 60 million Yen.
Although the Bank of Japan’s introduction of negative interest rates has encouraged banks to lower the interest rates offered on home loans, the increased price of new condominiums has gone beyond the budget of typical home buyers. Meanwhile, increased buying activity from domestic investors, particularly from the greater Tokyo area, has picked up some of the slack.
With higher property prices, buyers are starting to become picky about location and distance from transport. Properties in central Sapporo that are within a five minute walk from the nearest train station are popular, while buyers are avoiding properties over a 10 minute walk from transport.
For a developer, having unsold inventory in a completed project can create a bad or unpopular image for their company and for the building itself. As a result, some developers are holding off on releasing condominiums for sale even for projects that have already completed construction. This is making it difficult to understand the full scale of unsold inventory in Sapporo.
The Hokkaido Shimbun, March 25, 2016.
The Hokkaido Shimbun, April 15, 2016.
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