The average sales price for a condominium released for sale in the greater Tokyo area in the first half of 2017 increased to ¥58.84 million (525,800 USD), up 3.5% year-on-year, and approaching levels last seen at the peak of the asset price bubble.
This was the third highest average price ever recorded and close to the average price reached in 1990 of ¥59.35 million. The peak price of ¥64.50 million was recorded in 1991. This is according to a recent report by the Real Estate Economic Research Institute.
The increase in the average price was primarily led by high average prices for properties located in Tokyo’s 23 wards.
New Condo Supply Rises for First Time in Four Years
Another key takeaway from the report is that the number of new condos released for sale by developers in the greater Tokyo area (which includes Tokyo and the surrounding prefectures of Chiba, Saitama, and Kanagawa) from January to June grew 1.9% year-on-year to 14,730 units. This is the first increase in four years.
Developers have held back on releasing units for sale in the capital region due to slower sales in the last few years, which have been blamed on rising prices. Price increases in turn have been driven by a labor shortage which has continued to push up labor costs.
Weak Contract Rate in Greater Tokyo
Also of note is that the contract rate (the number of sales contracts divided by the number of units released for sale) in the greater Tokyo region for the first half of this year was 67.3%. A contract rate of 70% is the minimum expected in a healthy market.
Sales of Condos in 23 Wards and Western Suburbs
Looking at where people are actually buying, Tokyo’s 23 wards and the western suburbs (which includes 30 cities and towns east of the 23 Wards, like Hachioji, Machida, and Chofu) led the way in the first half of the year. Number of units sold increased 5.4% year-on-year in the 23 wards and 28.1% in the western suburbs. In contrast, Kanagawa, Saitama, and Chiba saw the number of units sold decrease by 3.9%, 14.9%, and 12.7%, respectively.
Osaka Region Sees Strong Contract Rate in Contrast to Tokyo
In contrast to the Tokyo region, the Kinki region, (which includes the cities of Osaka and Kyoto and the prefectures of Hyogo, Nara, Shiga, Wakayama, and Mie) saw a strong contract rate of 76.9% in the first of 2017.
The number of new units released for sale in Kinki fell in the first six months of the year to 8,815 units, a year-on-year drop of 1.4%, while the average price of a unit sold decreased 2.7% to ¥37.09 million.
Of note in the Kinki region is that the average price of a condo sold in Kyoto dropped 24.1% year-on-year. This has been caused by the lack of buildable land in the city center. As a result, builders have been developing family-oriented condominiums in suburban areas for more value-conscious buyers.
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