By Jeff Wynkoop
This is part two of a two-part series on the main factors affecting home prices in Tokyo this year. In part one, we covered:
- The Kuroda Effect
- Location and the 3-Part Marketplace
- Importance of Proximity to the Station
- Olympic Effect
- Consumption Tax Effect
Below we discuss:
- Newly-built versus pre-owned houses
- The market for free-standing houses
- What are the popular neighborhoods for buying a new home?
Newly-Built Houses versus Pre-Owned
This is another area where the Japanese housing market is changing significantly. The market for pre-owned homes was almost non-existent 30 years ago, but these days the pre-owned segment is seeing a significant bounce in demand. This is partly due to the high price of new residences, as there are simply fewer and fewer people who can afford a new place. Further, the price of new homes will likely stay out of reach of a large segment of would-be buyers for the foreseeable future. The difference in price between similar new and pre-owned residences in Tokyo proper is roughly ¥20 million, and in Kanagawa and Saitama the difference is closer to ¥30 million (according to data from the Real Estate Economic Institute Co., Ltd.). It should be noted this is at least partly due to the government introducing several new measures to stimulate the pre-owned home market over the last five years.
Given all of this, the market for pre-owned homes will likely continue to close the gap with new home prices. However, the pace of the trend depends on location as much as anything else. In the three most desirable wards of Tokyo, prices have shown a 60% jump since Prime Minister Abe came into office again in 2012, whereas in Kanagawa and Saitama, the bounce is closer to 20%. In general, it seems likely that buyers expect prices in Tokyo to be on firmer ground than in the other two prefectures.
The Market for Free-Standing Houses
The market for free-standing houses began to gain momentum in 2017, which is rather late in the cycle. One reason for this belated trend is that buyers finally decided their best bet was to remodel a pre-owned home, even one a little further away from the nearest station, and the freedom of remodeling a “non-condominiumized” property. New legal changes to spur the supply of house inspection service companies have also certainly played a part.
Most Popular Neighborhoods for Buying a New Home
According to a July 2019 internet survey of 2000 households by Recruit Sumai Company Ltd., the most popular neighborhoods for the next year (2020) can generally be divided into places that are being positively affected by municipal redevelopment activities or by preparations for the 2020 Olympics, or both.
Toyosu and Ariake (#13) ranked high on the list, since they are both being significantly affected by new construction for the Olympics. In fact, Toyosu was number one on the list since it is benefitting from both effects: new city re-development projects as well as its proximity to many venues for the 2020 Olympics. There is also a new, nearby major thoroughfare (the Second Loop Highway or so-called Macarthur Road) slated to be completed in 2021.
Number two on the list was Shinagawa, which is due to the large number of re-developments in the area, as well as positive effects from the new train station on the Yamanote Line (the Takanawa Gateway Station) scheduled to be opened in 2020 before the Olympics. It is also conveniently located to Haneda Airport, which is going to benefit greatly from an increase in international flights in the next few years. The nearby Tamachi area was tied for #10 on the list.
Tsukishima (#7) and Kachidoki (#9) also made the list, since both are going to have several major new housing projects completed in the next five years. Kachidoki is also popular due to its proximity to several Olympic venues as well as the refurbishment and expansion of the closest train station. The complete list is:
Toyosu (#1), Shinagawa (#2), Tokyo (#3), Shibuya (#4), Shinjuku (#5), Asakusa (#6), Tsukishima (#7), Ginza (#8), Kachidoki (#9), and Yoyogi/Tamachi (tied for #10).
- Yoyogi / Tamachi (Tied for #10)
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Lead photo: Toyosu, stock photo