Tokyo New Apartment Supply Drops 35% Due to Coronavirus Fallout

Developers in greater Tokyo pulled back sharply on the supply of new condominiums offered for sale in March due to the impact of the coronavirus. This is according to the Real Estate Economic Institute, a Tokyo-based think tank, which recently reported that there were 2,142 new apartments released for sale last month in the greater capital region, a year-on-year drop of 35.8% and a fall of 44.0% compared to February. Despite signs that the demand side remains steady, suppliers are guarding against an inventory buildup.

Below are the other key takeaways from the April REEI report for the greater Tokyo region, which includes Tokyo and the prefectures of Chiba, Saitama, and Kanagawa.

Contract rate

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.

In March, the contract rate reached 70.0%, suggesting that buyer demand remains strong, amidst tight supply. This was an increase of 10.7 percentage points compared to February but a slight decrease from March 2019, when the contract rate was 72.2%.

Looking at the monthly contract rate in the trailing twelve months, the rate in March represented a seven month high and only the second month in the last twelve when the number even reached the 70 percent dividing line.

The consumption tax increase on October 1, 2019 from 8% to 10% had an impact on the contract rate, but the government continues to offer numerous incentives and subsidies to support home buyers. Sales of newly constructed condominiums and free-standing houses are subject to consumption tax. Re-sale houses and apartments are not. Many buyers also purchased preemptively in the run-up to the sales tax increase.

  • Mar 2020: 70.0%
  • Feb 2020: 59.3%
  • Jan 2020: 63.0%
  • Dec 2019: 61.3%
  • Nov 2019: 55.2%
  • Oct 2019: 42.6%
  • Sept 2019: 56.8%
  • Aug 2019: 75.4%
  • Jul 2019: 67.9%
  • Jun 2019: 65.9%
  • May 2019: 60.0%
  • Apr 2019: 64.3%
  • Mar 2019: 72.2%

Average sales prices by area

The March average sales price for the greater Tokyo area as a whole was ¥61,560,000 ($572,000 USD).

The following is the average sales price by area.

  • Tokyo 23 Wards: ¥73,220,000 (-5.4% year-on-year)
  • Tokyo western suburbs: ¥52,680,000 (-18.1%)
  • Kanagawa prefecture: ¥49,992,000 (-9.3%)
  • Saitama prefecture: ¥49,310,000 (+3.7%)
  • Chiba prefecture: ¥47,480,000 (-12.2%)

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

Average price per sqm, by area

The March average sales price per square meter for the greater Tokyo area as a whole was ¥973,000.

The following is the average sales price per sqm, by area.

  • Tokyo 23 Wards: ¥1,242,000 (+5.2% year-on-year)
  • Tokyo western suburbs: ¥759,000 (-16.2%)
  • Kanagawa prefecture: ¥749,000 (-4.7%)
  • Saitama prefecture: ¥734,000 (+7.9%)
  • Chiba prefecture: ¥682,000 (+2.7%)

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Source: Real Estate Economic Institute, April 16, 2020 (in Japanese)

Lead photo: Tokyo cityscape, iStock