The average price of land in Japan climbed 0.4 % year-on-year, the second consecutive year with an uptick. This is according to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT)’s Standard Land Price (基準地価, Kijun Chika) survey for 2019, that was released in September.
Last year was the first year of positive growth (0.1% year-on-year) in land prices nationwide since the burst of the asset bubble. In 2018, the main growth driver was inbound tourism fueling a boom in construction of hotels and shops.
What is driving the increase in land prices?
This year, inbound tourism is still the main growth driver, but the MLIT points out that the causes behind growth are more disperse, including slow-and-steady economic recovery, an improvement in employment and household income numbers, and the low interest-rate environment. Other key factors include:
- Residential: Increased demand for conveniently situated residential land (near major stations and terminal stations) and areas with convenient services and amenities nearby.
- Commercial: A strong office market and booming inbound tourism is driving up prices due to demand for retail space and hotels.
The July 1st survey looked at some 21,500 survey sites nationwide, covering all types of land across the country. Survey sites include both urban areas and 3,500 sites located outside town planning zones with low potential for development and price increases.
Below are the main takeaways from this year’s survey.
- Nationwide, residential land prices fell on average 0.1% (-0.3% year-on-year), but the rate of decline also decreased.
- Commercial land continued a strong upward trend. Commercial land prices, nationally, rose 1.7% (+1.1% year-on-year), the third consecutive year of increases.
- In the four main metro areas (Tokyo, Osaka, Nagoya, and Fukuoka), land prices in general rose 2.1% (a year-on-year increase of 0.7%), residential land prices ticked up 0.9% (+0.7% year-on-year, and average prices for commercial land were up 5.2%. This continues the strong multi-year growth trend in urban areas.
- In local areas (outside the main metropolitan areas), commercial land prices rose for the firts time in 28 years. Industrial land prices also broke a 27-year downtrend trend, with average prices ticking up nationally.
- The longer term trend of polarization (growth in major regions versus decline in rural and secondary cities) is continuing. Nationwide, prices rose in about 10% of plots surveyed, mainly in the three major urban areas, in areas being re-developed, and in areas favored by foreign tourists. In about 30% of plots surveyed, prices have continued to decline.
Tourism driving growth in commercial land prices
Tourism is driving the strong growth trend in commercial land prices. In 2018, the number of inbound tourists to Japan exceeded 30 million for the first time.
This underpins the high rate of growth in commercial land prices in Hokkaido, Okinawa, and Osaka. A plot of land in Kutchan Town in Hokkaido (just north of the world-famous ski resorts of Niseko) took top honors as the piece of land with the highest rate of growth for all commercial land plots nationwide. In this year’s survey, this plot of land grew 58.8% year-on-year and is currently assessed at ¥63,500 ($588) per square meter, or approximately ¥5,899 per square foot.
In the residential market, Kutchan Town also had the piece of land with the rate of growth for all residential land plots nationwide. The particular plot (located at 38-29 Kuchan) grew 50.0% in price year-on-year and is currently assessed at ¥75,000 per square meter, or approximately ¥6,968 per square foot.
Kutchan is favored by skiers looking to build vacation homes near Niseko ski resorts.
At the other end of the country, Okinawa had the highest rate of growth in both residential and commercial land prices.
Residential land prices in Tokyo’s 23 Wards increased by an average of 4.6% (compared to a 4.3% year-on-year increase in 2018). Commercial land prices in the 23 Wards also increased by 8.4%, a drop from last year’s increase of 7.2%. This year’s increase marked the seventh consecutive year of increases in the residential and commercial sectors.
The most expensive plot of residential land in Japan is located in Akasaka, Minato Ward, with an assessed value of ¥4,530,000 per square meter, or or approximately ¥420,827 ($3,898) per square foot.
As in last year’s survey, the most expensive plot of commercial land in Japan is at the site of the Meidi-ya Ginza building in Ginza. It was assessed at ¥43,200,000 per square meter.
Lead photo: Mt. Yotei, Niseko, Hokkaido. Photo by Ryan Kartzke via Flickr.
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