Average Price of a New Apartment in Greater Tokyo Rises for 8th Consecutive Year

In the first half of 2020, the average sales price of a new apartment in greater Tokyo reached ¥66,680,000 ($623,000), the eighth consecutive year in which the average price has increased in the first half of the year. This is according to the Real Estate Economic Institute’s recently released greater Tokyo condominium market overview.

The main factors behind the record-breaking average sales figure are continued high constructions costs, due to a long-term shortage of construction workers and extremely tight supply due to the fallout from the coronavirus.

Record drop in supply

The other key takeaway from the 2020 first-half report is that the supply of new condominiums released for sale in greater Tokyo fell below 10,000 units for the first time ever. From January to June, developers only made 7,497 units available for sale, compared to 13,436 units for the same period in 2019, a drop of 44.2%. The highest number of units ever released for sale in the first-half period was 46,816 units, in the year 2000.

By area, the Tokyo 23 Wards saw the lowest percentage YoY drop in supply, at -29.6%. The supply change in other areas of greater Tokyo are as follows:

  • Western Tokyo suburbs: – 40.5%
  • Kanagawa prefecture: -53.1%
  • Saitama prefecture: -74.8%
  • Chiba prefecture: -40.1%

Many developers shut down model showrooms throughout most of April and May. This was in line with the government’s request for people to avoid non-essential outings to help prevent the spread of the coronavirus.

Price

For the greater Tokyo region as a whole, the average sales price per sqm for January to June 2020 was ¥1,031,000 per sqm.

This was the highest average sales price per sqm ever recorded, surpassing the previous record set in 1991 (¥1,019,000 per sqm).

Below is the breakdown by area.

Average Sales Price by Area

  • Tokyo 23 Wards: ¥81,900,000 (+7.1% year-on-year)
  • Tokyo western suburbs: ¥54,490,000 (-3.4%)
  • Kanagawa prefecture: ¥51,500,000 (-2.9%)
  • Saitama prefecture: ¥49,290,000 (+1.6%)
  • Chiba prefecture: ¥46,390,000 (+3.4%)

Average Sales Price per Sqm

  • Tokyo 23 Wards: ¥1,324,000 (+10.7% year-on-year)
  • Tokyo western suburbs: ¥811,000 (+0.7%)
  • Kanagawa prefecture: ¥793,000 (+2.5%)
  • Saitama prefecture: ¥729,000 (+6.1%)
  • Chiba prefecture: ¥633,000 (+4.8%)

Contract rate

The first month’s contract rate for the January to June period was 68.3%, compared to 66.5% for the same period last year. The “first month’s contract rate” is calculated by dividing the number of sales contracts by the number of units release for sale for the period, for all units sold in the first month in which they were made available for sale. A contract rate of 70% is the dividing line between a sellers’ and buyers’ market.

The average contract rate for the first six months of 2020 was lower than for the months of March, April, May, and June when the contract rate was above 70% (indicating a buyers’ market). The contract rate for the first two months of the year was significantly lower (63.0% in January and 59.3% in February), which pulled down the average for the first half of the year. Basically, demand has stayed high but supply has shrunk drastically in the last three months which has helped to lift sales prices.

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Sources: Real Estate Economic Institute (REEI) January to June 2020 Greater Tokyo Condominium Market Report, REEI June 2020 Greater Tokyo Condominium Market Report

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