The Real Estate Economic Institute (REEI) has released its forecast for supply and trends in the new condominium market for the greater Tokyo area, which includes Tokyo and the prefectures of Kanagawa, Chiba, and Saitama.
Supply of New Condos to Increase by 4.4%
The REEI forecasts that developers will release about 38,000 new condo units for sale in the greater Tokyo area next year, a year-on-year increase of 4.4%. Depending on demand, this could potentially reach the 44,000 level. This compares with an estimated increase of 36,400 units in 2017, a year-on-year increase of 1.8%. Despite the continuing increase in supply, sales prices have continued to rise.
The supply of units in the Tokyo suburbs is expected to increase in 2018, following the increase of new units made available in the Tokyo 23 Wards this year.
The Institute also notes the positive market outlook espoused by major developers. Mid-ranking developers have started to focus on convenience as a selling point for potential buyers.
Re-Development Projects Driving Growth
Major re-development projects in the Tokyo 23 Wards and western suburbs have helped to drive demand for new condominiums. In the suburbs, projects near major stations have also seen a recovery in popularity.
There are expectations for strong price appreciation in the central five wards of Chiyoda, Minato, Chuo, Shibuya, and Shinjuku as well as in Ota, Shinagawa, and Meguro wards. Market watchers also expect large-scale re-development projects in the western suburbs.
In the surrounding prefectures the REEI also projects growth, as Chiba will see a 32.4% increase in the number of new condominium properties to 4,500 units and Saitama will also get 4,500 new condo units (an increase of 15.4%).
Inventory Stable, Construction Starts Slightly Up
As of the end of November, inventory fell slightly to 6,240 units, considered to be a stable level.
Construction starts from January to October 2017 increased in the greater Tokyo area by 1.9% to 56,279 units. Chiba especially saw a big jump in new construction, up 23.7%, with Tokyo up 6.6%.
Average Sales Price Approaching 1990’s Levels
The average sales price for a new condominium sold in the greater Tokyo area from January to November 2017 was ¥58,840,000 ($520,00), which was close to the peak reached in 1991 of ¥59,000,000.
Strong Demand Forecast Ahead of Consumption Tax Increase
The Abe administration has committed to increasing the the consumption tax to 10 percent in October 2019. Ahead of the increase, demand by home buyers is expected to ramp up significantly starting in the second half of 2018. This is expected to affect demand for properties especially in the Tokyo suburbs.
Sales prices are forecast to remain strong in the central Tokyo wards, while increasing demand in the suburbs may see sales prices approaching peaks in 2018, especially for properties near major hub stations.
Developers are focusing on building properties that support child rearing and amenities to support a healthy lifestyle.
Source: Real Estate Economic Institute (in Japanese)