The average price of a parcel of land in Japan fell 0.4% year-on-year, the second consecutive year in which land prices have dropped, following three years of steady growth (2017 to 2019). However, the rate of decline in the 2021 survey is smaller than in 2020 (when land prices fell 0.6%), as some regional cities have started to show a turnaround.
The malaise is directly related to the border situation. Foreign tourists have been shut out of the country in order to slow the spread of the coronavirus demand and tourism-related real estate (stores and hotels) has fallen sharply as a result; this is especially pronounced in Osaka.
However, the data also shows that demand for offices in Tokyo city-center locations remains stable, compared to the demand for retail. There have also been transactions by foreign investors bargain hunting for commercial land sold by companies trying to shore up their balance sheet. The takeaway here is that Tokyo commercial land is seen as having the potential to provide stable yields.
Until the pandemic, land prices in Japan had been on a slow uptrend that started in 2018, when for the first time in 27 years, the national average land price rose for the first time since the bursting of the asset bubble in the early 1990s.
This data comes from the Ministry of Land’s latest Standard Land Price (基準地価, kijun chika) survey as of July 1st, with survey results released on September 20th; 21,443 sites were surveyed across the country.
The average price of commercial land fell 0.5% YoY, a sharper decrease than 0.3 percent last year; and in 41 of the country’s 47 prefectures commercial land prices declined, compared with 36 prefectures in the previous year.
By region, average commercial land prices fell in the Osaka area for the first time in nine years, with the Dotonbori district, a major tourist destination, in Osaka plummeting 18.5%, the largest drop among commercial land nationwide.
Commercial sites outside the three major metropolitan areas also saw a 0.7% decline.
However, commercial land prices rose in Nagoya, reversing a decline in 2020. The Tokyo metropolitan region and the regional cities of Sapporo, Sendai, Hiroshima, and Fukuoka continued to see increases in their commercial land prices mainly due to the expected effects of ongoing urban redevelopment projects.
The average price of residential land nationwide fell 0.5% YoY, slowing from a 0.7% in 2020. In total, 38 prefectures saw declines in residential land prices, compared with 42 the previous year. This is seen to be caused by consumers continuing to be cautious amidst weak employment and wage conditions.
However, seven prefectures saw an increase in residential prices, compared to five last year:
The MLIT report points to the background of low mortgage interest rates helping to sustain homebuyer demand. Residential land prices near major train stations remains strong.
In both the Tokyo and Nagoya metro regions, residential land prices rose in 2021, compared to having declined in 2020.
Among the surveyed sites, the island city of Miyakojima, Okinawa Prefecture, recorded the highest price rise for residential land of 22.9%, boosted by resort development.
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Source: Japan Ministry of Land, press release on Q2 kijun chika (PDF in Japanese), September 20, 2021
Lead photo: Enoshima Island, Kamakura, via iStock 031458576