Average sales price of a newly built apartment in Tokyo hits record high in 2021: Behind the headline numbers

The average selling price of a newly built condominium in greater Tokyo reached ¥63,600,000 ($490,000 USD) in FY2021, exceeding asset bubble era highs and the highest ever recorded by the Real Estate Economic Research Institute. The average price per square meter was also a record high, at ¥953,000 per square meter.

Here are the other key takeaways from the REEI’s FY2021 market trends report for newly built condominiums in the Tokyo metropolitan area. The report covers the period from April 2021 to March 2022

Developers in greater Tokyo released 32,872 units for sale, an increase of 13.2% compared to FY2020. This was the first time that the number of units has exceeded the the 30,000 mark since 2018; and a huge jump compared to 2020, which developers put the brakes on sales activities in response to the pandemic. In 2020, only 29,032 units were released for sale.

The contract rate for FY2021 was also strong, coming in at 72.9%, the first time that the contract rate has been in the 70% range since FY 2015. The contract rate is the number of units contracted for sale divided by the number of units offered for sale. Seventy percent is considered the dividing line between a seller’s and buyer’s market.

Taking a look behind the headline numbers, here are a few points worth noting about the underlying numbers.

The Tokyo 23 Wards did most of the heavy lifting

While it’s true that average sales prices for the entire metropolitan region have reached a new high, it’s important to know that by region, the Tokyo 23 Wards have an overwhelming influence on the overall sales price. On average about 40% of units released for sale in the metro region are located in the Tokyo 23 Wards. Here is the breakdown of average sales prices by prefecture in the last seven years:

The average sales price in the Tokyo 23 Wards in FY2021 was also 32.8% higher than the average price for the entire metro region.

The Tokyo western suburban cities and Kanagawa prefecture actually had lower average sales prices in FY2021 than FY 2018, as well as having fallen versus FY2020. Chiba prefecture also fell versus the previous year.

Here is how price growth looked by prefecture on a per square meter-basis for the last seven years:

In FY2021, the per square meter price of a new apartment sold in the Tokyo 23 Wards rose 11.7% versus the previous year. Saitama also saw strong per meter price growth, up 7.8%. Every other sub-region saw falling prices on a per square meter-basis, but overall the greater Tokyo region was up 6.1% in FY2021 versus the previous year.

The percentage change in the average sales price per square meter versus FY2015 was also impressive, with the average price for the greater Tokyo region up 20.2% for the period.

Average sales price change per sqm in FY2021 v FY2015
Tokyo 23 Wards 30.7%
Tokyo Western Suburbs 16.1%
Kanagawa Prefecture 9.6%
Saitama Prefecture 23.3%
Chiba Prefecture 24.2%
Greater Tokyo Region 20.2%

Demand was strong across all prefectures

Every prefecture had a contract rate above 70%, indicating a sellers’ market, with demand exceeding supply. The contract rate in Chiba was close to hitting 80%. Even as more developers are building in the prefecture in response to urban redevelopment projects, rising land prices in central Tokyo, and a shift to people moving to the suburbs, there is still not sufficient inventory to meet demand.

FY2021 Contract Rate Change v. FY2020
Tokyo 23 Wards 72.0% Up 3.4 Points
Tokyo Western Suburbs 73.7% Up 24.5 Points
Kanagawa Prefecture 72.1% Up 2.2 Points
Saitama Prefecture 70.2% Up 7.1 Points
Chiba Prefecture 79.8% Up 1.7 Points
Greater Tokyo Region 72.9% Up 5.2 Points

Tight supply in the Tokyo metro region and the likelihood of ongoing historically low mortgage rates means that buyer demand will likely remain buoyant this year. If so, there seems to be a strong likelihood of continued price appreciation.

Source: REEI, FY2021 market trends report for newly built condominiums in the Tokyo metropolitan area (PDF in Japanese)

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