Land prices dropped in 38 of 100 of locations surveyed by Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT) in its Q2 2020 LOOK Report, which surveys land price trends for intensively used commercial and residential land in major cities throughout Japan.
In this quarterly survey, a selected 100 commercial and residential land plots throughout the country are rated as to whether land values are rising, flat or falling. In the 2020 Q2 survey, which covers the period from April 1 to July 1, of the 100 locations surveyed, only one (a commercial district in Aoba Ward of the city of Sendai) saw positive growth; compared to 73 in the previous quarter. Land values stayed flat in 61 locations.
This was the first time in eight years that the number of locations with falling value outnumbered those with rising land value.
It also marks an abrupt halt to five consecutive years of annual growth, as of January 1st, 2020. Land values, especially in Japan’s main urban centers (Tokyo, Osaka, and Nagoya) had been steadily rising due to the government’s push to increase the number of inbound tourists. Tourism demand has in turn supported urban redevelopment and frenzied construction of commercial and hospitality projects, especially in Tokyo and Osaka.
Inbound tourism essentially shutdown starting on April 3rd, when Japan issued an entry ban on people traveling from 73 countries, including China, which has up to now been a major source of tourism spending. The entry ban, enacted in order to help stop the spread of the coronavirus, has since been extended to over 127 countries. The number of foreign visitors dropped 99.9% year-on-year for four consecutive months through July.
At the same time, the government has urged people to exercise self-restraint in going out, for companies to permit employees to work from home, and for izakaya and restaurants to limit hours of operation. These measures have depressed demand for commercial spaces.
For example, Shinsaibashi and Namba, two of Osaka’s main commercial areas saw drops of 3% to 6% in land value, after increases of less than 3% in the previous report, which was driven primarily by inbound tourism.
Locations in Tokyo mostly stayed flat. About 90% of locations surveyed in the capital stayed did not change in value. However, Kabukicho and Ueno were downgraded from increases in value of less than 3% in the previous report, to losses of 3% to 6% in the current quarter.
Importance of the LOOK Report
The LOOK Report is closely watched as a lagging indicator of land price trends. The MLIT surveys 100 locations throughout the country: 43 in Tokyo, 25 in Osaka, 9 in Nagoya, and 23 in regional cities. Thirty two (32) locations are residential and 68 are commercial.
The full impact of the coronavirus is only beginning to be felt in the economy and in land values. The hospitality industry, for example, was already facing oversupply and the postponement of the Tokyo 2020 Olympics. As it remains unclear when the travel ban on inbound tourists will be lifted, land prices will likely face strong headwinds, as the hotel industry is forced to downsize. Many companies have shifted office workers to extended remote work and now have a much reduced demand for city-center office spaces.
Source: MLIT 2020 Q2 LOOK Report (PDF in Japanese)
Lead photo: Shinsaibashi-suji shopping street, Osaka via iStock