The average sales price of a new apartment sold in the Tokyo 23 Wards hit ¥105,110,000 ($942,000) in January 2020, a year-on-year increase of 38.7% and breaking the ¥100 million mark for the first time in 27 years.

Newly constructed condominiums in the greater Tokyo area also had a strong start to the year, with sales prices averaging ¥83,600,000, a year-on-year increase of 47.9% and a record high.  The previous record high was ¥74,970,000 in November 1990, when asset prices in Japan were surging in the bubble economy.

These numbers are as reported by the Real Estate Economic Institute’s (REEI) sales data report for January, for the greater Tokyo metropolitan area, which consists of the city Tokyo and the prefectures of Chiba, Saitama, and Kanagawa.

Below are the key takeaways from the REEI’s January 2020 report on the greater Tokyo new condominium market.

Big drop in number of units released for sale

Developers released 1,245 newly constructed condominium units for sale in January, a year-on-year drop of 34.5% and an 80.5% drop compared to December. About 59.0% of all units offered for sale in greater Tokyo were concentrated in the Tokyo 23 Wards.

Caution is the name of game, as developers are wary of oversaturating the market and many middle-income buyers are not able to afford new apartments. As we discussed in this article (on 2019 average sales price for a new apartment in Tokyo), the key driver in increasing average sales prices has been tight competition for apartments in central Tokyo areas by dual high-income households. People who cannot buy new units in central Tokyo areas are looking in the suburbs and/or buying previously owned apartments.

Sales were strong in the high-end segment

Drilling down by segment, developers hit the target in the high-end market, specifically for units listed for sale with an offer price between ¥90,000,001 and ¥99,999,999 ($807,000 and $897,000). Apartments in this price offered for sale in the greater Tokyo area had an average contract rate of 76.2%, well above the overall contract rate of 62.5%. The contract rate is the number of units contracted for sale divided by the number of units offered for sale. A contract rate of at least 70% is considered a healthy buyers market.

Another important takeaway from looking at price segment data is that almost a quarter of all units released for sale in the greater Tokyo area in January were priced between ¥100,000,001 and ¥299,999,999. The contract rate for units priced between ¥100,000,000 and ¥199,999,999 had a contract rate of 69.4%, almost touching the 70% benchmark. As alluded to above, some middle-income buyers are unable to afford new apartments in the ¥70,000,000 price point and below. However, buyers in the high-end and ultra-high end market remain active.

Please see the chart below for the breakdown by price range.

Average sales prices by area

• Tokyo 23 Wards: ¥105,110,000 (+38.7% year-on-year)
• Tokyo western suburbs: ¥66,490,000 (+37.9%)
• Kanagawa prefecture: ¥49,610,000 (-2.4%)
• Saitama prefecture: ¥43,260,o00 (-13.7%)
• Chiba prefecture: ¥40,650,000 (+11.9%)