According to the NLI Research Institute, the number of households in Japan with a total annual income of over 7 million Yen (approx. 62,000 USD) reached 250,000 in 2016, an increase of 20% since 2013.
While wage growth remains sluggish, the growing number of women entering the workforce has pushed up household incomes. The White Paper on the Labor Economy issued by the Health, Labor and Welfare Ministry reported that Japan’s female labor force in 2016 grew by 400,000 over 12 months, far exceeding the 90,000 growth in the male labor force over the same period.
When it comes to buying homes, two-income households may have different priorities than single-income households. Convenience to transport is much more important, as is a short commute from work. This is creating high demand for properties in central Tokyo, particularly those in luxury high-rises.
Across the board, current property market conditions are more subdued and restrained than during the bubble economy, with price growth and demand largely limited to popular central areas. The contract ratio on new apartments for the first half of 2017 has been 67.3%, below the ideal level of 70% said to indicate healthy market conditions. However, this figure is thought to be influenced by poor demand for properties located in the outer suburbs where commutes are long.
Existing apartments holding value
Last year, 35,772 brand new apartments were released for sale across greater Tokyo, the lowest level seen since 1992. This shortage in supply is forcing many buyers to look to the resale market, which has helped support growth in the resale price of existing apartments.
Apartments in central areas that are close to train stations have been holding their value in recent years. According to research firm Tokyo Kantei, the average price of a 10-year old apartment located within a 3 minute walk of the nearest train station increased by 8% since new, while apartments more than 10 minutes from a train station had resale values of below their original price when new.
In 2016, the average sale price of a condominium in Tokyo within a 3 minute walk from the nearest station was 50% higher than average prices in 2011.
More and more local buyers are starting to consider the resale value of an apartment down the track. In the past, home buyers would plan to live in the apartment for the rest of their life, placing less important on factors like resale potential. As a result, location is playing a larger part in the decision process.
Source: The Nikkei Shimbun, October 4, 2017.