Land prices in Japan up for first time in two years: 2022 Rosenka Land Value Survey

Nationwide land values increased 0.5% in 2022, the first time in two years that land prices in Japan have increased. This is another data point suggesting that the real estate market is recovering from pandemic lows.

The Roadside Land Value (rosenka, 路線価) survey is an annual survey done by the National Tax Agency (NTA) and is used for calculating inheritance and gift tax when ownership in land is transferred. The NTA assessed land values as of January 1, 2022 and announced the results on July 1.

Land values up in 20 prefectures

One of the key takeaways is that land values increased in 20 of the country’s 47 prefectures, compared to seven prefectures in the 2021 survey. Land values in thirteen prefectures, including Tokyo, Osaka and Aichi, which were negative in 2021, turned positive in this year’s survey. Average land values fell in 27 prefectures, such as Shizuoka and Hyogo, compared to 39 prefectures in 2021.

Redevelopment driving land value growth

Another standout data point is that neighborhoods undergoing re-development have seen positive knock-on effects in land values, both in urban and rural areas.

For example, a major re-develpment project at the site of the JR Tower Esta and JR bus terminal near Sapporo Station is the main reason why land values nearby (Atsubetsu Chuo 2-5-chome, Atsubetsu-ku) shot up 13.5% in 2022 (and 8.8% in 2021). The new development is scheduled to open in the fall of 2029 and will feature a Marriott hotel on the top floor, as well as office and retail space.

JR also plans to extend the Hokkaido shinkansen to Sapporo Station. The Sapporo shinkansen stop is scheduled to open in 2030, coinciding with the the 2030 Winter Olympics, for which Sapporo was the first city to submit a bid. The host city has not yet been decided, but transportation and other urban redevelopment projects around the city are helping to juice land values.

Due primarily to strong growth in Sapporo, Hokkaido led the nation in percentage growth in land values compared to 2021, coming in at 4.0% YoY.

Fukuoka prefecture also saw a strong increase, chalking up a 3.6% year-on-year growth rate. This is primarily due to the Tenjin Big Bang project, a major redevelopment project in central Fukuoka City, that will redevelop 30 older buildings over the next ten years. By 2025, the plan is to increase the total available floor space in the city center by about 260,000 square meters, or about a 10% increase in the available current rental office space. The government of Fukuoka is hoping to turn the city in to a hub for Asian business and technology hub. For more on this, please see: 3 Reasons Why People are Buying Real Estate in Fukuoka.

Ranking of Prefectures with Highest Rate of Growth in Rosenka Land Value Survey,

Source: National Tax Agency

Rank Prefecture Average % Growth in Land Values
2022 v. 2021
Average % Growth in Land Values
2021 v. 2020
1 Hokkaido 4.0% 1.0%
2 Fukuoka 3.6% 1.8%
3 Miyagi 2.9% 1.4%
4 Okinawa 1.6% 1.6%
5 Aichi 1.2% -1.1%

Another prefecture worth noting is Aichi, which has seen a growth in the number of households, as people have moved from larger cities, like Tokyo and Osaka. Residential housing prices are forecast to continue rising in Aichi as more working people and families are taking advantage of the ability to telecommute to their jobs.

Impacts of depopulation, border closure and telecommuting

On the flip side, prefectures that saw population declines have also experienced a drop in land values.

The four prefectures of Shikoku fell in land values for the second consecutive year, and four of the six prefectures in the Tohoku region were negative.

Ranking of Prefectures with Lowest Rate of Growth in Rosenka Land Value Survey, Source: National Tax Agency
Rank Prefecture Average % Growth in Land Values
2022 v. 2021
Average % Growth in Land Values
2021 v. 2020
1 Wakayama -1.3% -1.2%
2 Ehime -1.1% -1.4%
3 Gunma -1.0% -1.0%
4 Fukui -0.9% -0.8%
4 Gifu -0.9% -1.4%
4 Mie -0.9% -1.2%
4 Tokushima -0.9% -1.3%
4 Kagawa -0.9% -1.1%

The impact of the disappearance of inbound (foreign) tourists due to pandemic-related border closures has also been severe. Osaka, which was a magnet for inbound tourists, especially from China, has been particular affected. For example, land values along the Osaka metro Midosuji line, where many foreign tourists used to shop at nearby department stores, dropped 4% year-on-year.

The increasing popularity of telecommuting has also had a negative effect on office vacancy rates, which in turn has dragged down land values in central business districts (CBD). Office vacancy rates in Tokyo’s five central wards or central business districts have steadily increased since January 2020, shortly before the start of the pandemic and is currently in the 6% range. A healthy occupancy rate is about 5%.

The increase in the vacancy rate has caused average contracted rents to fall, which is also reflected in lower land values. For example, land values along major streets in Tokyo like Daimyo Koji Avenue, in Chiyoda Ward and Sotobori Avenue, in Chou Ward, where many offices are concentrated, fell 1.3% year-on-year.

However, land values in many stations in Tokyo’s surrounding prefectures (especially Chiba and Kanagawa) and outlying wards have risen in the past year.

Source: National Tax Agency, 2022 Rosenka Survey (in Japanese), Greater Tokyo 2022 Rosenka ranking (in Japanese)

Photo credit: Odori Park in Sapporo, Hokkaido, iStock/bee32

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