Market Trends

Price of New Condos in Tokyo 23 Wards Up 28.8% Despite Tilting Condo Scandal

The average price of a new condo sold in Tokyo’s 23 wards in October was 68,770,000yen ($558,000), a year-on-year increase of 28.8%, according to the Real Estate Economic Institute.

The average price per square meter was 981,000yen/sqm ($7,956 per sqm or $740 per sqft), also a double-digit year-on-year increase.

However, there were fewer condos sold in October compared to last year. There were 748 new condos sold last month, a decrease of 2.3% versus October 2014.

Fewer Units Released For Sale in October

Developers released 1,129 apartments for sale in the 23 wards and 748 were sold in October, meaning that the contract rate was 66.3%. In October 2014, 1,381 new condos were put on the market and 988 were sold, a significantly higher contract rate of 71.5%.

In the greater Tokyo area (which includes Tokyo’s suburban cities and Kanagawa, Saitama and Chiba prefectures) there were 2,921 condos released for sale in October versus 3,500 units predicted by the Real Estate Economic Institute. The 2,921 apartments put on the market represented a 6.5% decrease year-on-year compared to October 2014.

However, the actual average sales price of condos sold in greater Tokyo last month increased by 17.6% to 53,640,000yen, and the average per-square-meter price increased by 19.0% to 759,000yen.

Some developers have delayed the launch of projects due to market uncertainty resulting from the Yokohama condominium scandal that came to broke in October.

Fallout from Yokohama Condominium Scandal

The scandal involves one of the biggest real estate developers in Japan, Mitsui Fudosan Residential Co., its main contractor Sumitomo Mitsui Construction Co., and subcontractors Hitachi High Technologies and Asahi Kasei Construction Materials Corp (Asahi Kasei).

It was found that a number of piles that were supposed to provide underground support for one of the four buildings in the Park City Lala Yokohama residential development in Tsuzuki ward, Yokohama were too short. The insufficient pilings caused the building to tilt.

An investigation found that about eight of the seventy concrete foundation piles that were supposed to support the building were not driven deep enough into the bedrock.

Apparently, a single employee who was responsible for gathering data on the foundation construction falsified the readings that determine whether the piles reached the load-bearing layer, as well as the amount of cement poured to secure them.

The scandal has subsequently spread nationwide, as Japan Today reports.

Data fabrication has now been found at 300 projects, involving ten employees of Asahi Kasei across Japan, including four in Hokkaido.

However, no tilting has been found yet in these new cases.

Asahi Kasei is currently discussing compensation with the Yokohama condo residents, as the building will have to be rebuilt.

Buildings with Same-Day Sellouts

Against this backdrop, a number of developments still had same-day sellouts in October, which means that all the units that the developer released for sales in that particular period received applications from interested buyers.

Sameday Sellout Oct 2015

The standout in October was the Brillia Towers Meguro in Shinagawa ward, which received more than 230 applications for the remaining 20 units available in the building. To see why this development has been so popular, please see What the Wealthy are Buying in Tokyo: High-Rise Condos in Meguro.

Photo: Minato Mirai, Yokohama