By Jeff Wynkoop
The National Tax Agency recently published its 2017 Roadside Land Values (路線価 or rosenka), and the key takeaway is that the national average price for land went up for the second straight year. Last year’s 0.2% growth doubled to 0.4% this year. The growth was widespread, with the highest valued land increasing in value in 27 major cities (up from 25 cities last year).
What is the Rosenka Survey?
The rosenka survey is used for calculating inheritance and gift tax when ownership in land is transferred.
The rosenka looks at parcels of land categorized by adjacent major road, and in 2017 over 330,000 parcels were surveyed. This is over ten times the number of parcels assessed for the other major public valuations, the Official Land Values (公示地価 or kouji chika) estimated as of January 1st and released by the Ministry of Land, Infrastructure, Transport, and Tourism (the “MLIT”) in March every year, and the Standard Land Values (基準地価 or kijun chika) estimated as of July 1st by each prefecture and published in September every year.
In Tokyo’s 23 wards, values were up on average 3.2%, a 0.3% increase over last year’s 2.9% jump. Osaka land was valued at 1.2% higher on average (over last year’s 1.0% growth), and land in Kyoto was up 1.4% (versus 0.8% last year). The pace of growth was down a little in the Nagoya area, with a 1.2% increase this year versus 0.8% last year.
Valuation in Ginza Eclipses Bubble Year Level to All-Time High
In the middle of Tokyo on Ginza’s Chuo Dori (Avenue), there is a parcel of land called 鳩居堂前（kyuukyodoumae) that has been valued as the most expensive in Japan for 32 years straight. This year’s rosenka for this land was 40.32 million JPY per square meter, higher than the previous record of 36.5 million JPY per square meter in 1992.
Land on Ginza’s Chuo Dori had the highest growth in valuation of all of the highest areas nationally at a 26.0% jump (up from last year’s 18.7% increase). Shijo Dori in northern Kyoto was second (up 20.6% versus a 16.9% increase last year). Last year’s highest growth area for all of the highest areas nationally was in Osaka’s Midosuji area (22.1% growth in rosenka last year), which was down to 15.7% growth this year. The top five areas were in Tokyo, Kyoto, Sapporo, and Osaka/Yokohama tied for fourth place this year.
New Construction Supporting Price Growth Nationally
In Ginza, where the most expensive parcel is located and where the highest increase in rosenka was logged, there are many new construction and redevelopment projects. These include retail spaces like Ginza Six, Ginza Place, and the Tokyu Plaza Ginza.
Demand for hotels in the area is also very high. In most of the other cities where the rosenka was up as well, there are a lot of redevelopment projects in the central downtown areas, including the new construction and/or refurbishment of hotels and retail space as well as office and residential buildings.
The question is how long will this spike in real estate activity hold? Some say land prices will slowly dip as the Tokyo 2020 Olympics approach, while others say prices for land in Japan should remain buoyant until the mid 2020’s. The key seems to be whether and to what extent the influx of new visitors from abroad will continue to support the Japanese economy, and whether the economy will be able to weather any outside crisis and continue to trend positively for the foreseeable future.
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