As equity markets worldwide have taken a thrashing to start out 2016, some local investors are taking a fresh look at alternative investments, such as real estate, to beef up their portfolio. Others have had their eye on Japanese residential real estate for some time, and may finally decide that this is the year for them.
Whatever the case, this forecast from the Real Estate Economic Institute (REI, 不動産経済研究所) provides a good overview of the big trends to look for this year in the Tokyo condominium market.
Sold Prices at a Recent Peak in 2015
The REI estimates that the total supply of condominiums on the market in 2015 in the greater Tokyo area (which includes Tokyo, Kanagawa, Saitama, and Chiba prefectures) was about 41,200 units.
The average price of a condominium sold in 2015 in greater Tokyo is estimated to be about 55,290,000 yen (about $470,000), an increase of about 9.3% compared to 2014, and the highest price since 1991, when the average price was 59,000,000yen.
Buyers Looking to the Core, Builders Facing High Construction Costs
The REI projects that the supply of condominiums will increase to about 43,000 units in 2016, up 4.4% compared to 2015. The institute notes that tight supply is occurring amidst a demographic trend of people moving into Tokyo’s urban core areas and high construction costs faced by developers.
The report also forecasts that developers will focus on building in Tokyo’s suburbs, as a way to keep down high construction costs, which are a major factor restricting supply in the core.
The big developers are seen to focus on building large-scale developments along railway stations located in the suburbs of Tokyo.
Limited Supply in Tokyo’s Core
Focusing in on Tokyo City, which includes the 23 wards plus its surrounding cities, the REI forecasts that buyers in 2016 will be primarily interested in buying units in large-scale developments in central Tokyo areas, a trend which is unchanged from last year.
However, the REI projects that the supply of condominiums in the core will remain unchanged from 2015 at about 9,000 units, very much limiting the availability of condominiums in the core.
In contrast, the REI forecasts that Kanagawa prefecture will see new supply of about 10,000 units, an increase of 16.3% compared to 2015. Similarly, Saitama and Chiba prefectures will also see supply increases of about 4,500 units each.
Limited Increase in Stock
As of the end of November 2015, the condominium stock in the greater Tokyo area increased year-on-year by 28.0% by 4,945 units and is expected to increase by about 5,000 units this year, as well.
In greater Tokyo, from January to October 2015, condominium construction starts totalled 54,429 units, a year-on-year increase of 6.3%. In the same period, Kanagawa prefecture saw a spectacular 60% increase in construction starts, breaking through the 10,000 unit mark.
Themes for Development: Safety and Energy-Saving
From January to November 2015, there were 149 condominium developers in the greater Tokyo area, a year-on-year increase of two companies.
In central Tokyo areas, buyers flocked to luxury developments in 2015 . The REI expects the same phenomenon to occur this year.
Developers are expected to focus on the same themes as in 2015: safety, energy-savings, and facilities that support child-rearing and the aged.
You may also be interested in: Osaka Condominium Market Forecast for 2016
Source: Real Estate Economic Institute (Japanese)
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