The Real Estate Economic Institute (REEI) has released an optimistic 2019 forecast for supply and price trends in the new condominium market for the greater Tokyo area, which includes Tokyo and the prefectures of Kanagawa, Chiba, and Saitama.
Supply in central Tokyo forecast to be flat – Effect of consumption tax increase seen to be limited due to tax relief measures
For the full 2018 calendar year, supply of newly constructed condominiums is projected to increase 2.2% to 36,700 units for the greater Tokyo area, with sales prices having increased for the last two years. Price growth is seen to be pausing, but at high levels last reached during the asset bubble years.
In 2019, the REEI projects supply growth to slow to 0.8% YoY for an annual release of about 37,000 units. New development will likely be flat in the Tokyo 23 Wards, while the western Tokyo suburbs and Kanagawa prefecture will see increasing supply.
As the government will be extending the home mortgage loan tax deduction for an additional three years, the effect of the announced October 2019 consumption tax increase on sales is seen to be limited. For more information on the deduction, please see: how to claim Japanese tax deductions and cash back benefits for home buyers in 2019.
Major Re-Development Projects Driving Growth
Major re-development projects in the 23 Wards in preparation for the 2020 Tokyo Olympics (notably in the Tokyo Bay athlete’s village area), near the new station (Takanawa Gateway) on the Yamanote line and other projects in the suburbs, especially those near major train hubs, are creating beneficial knock on effects for new condominium development.
About 16,000 new condominium units are expected to be released for sale in the Tokyo 23 Wards in 2019. This is flat compared with 2018.
Other areas in Kanto are seen to be recovering supply growth: Kanagawa prefecture (projected up 9.0% YoY to 8,500 units) and Saitama prefecture (projected up 4.7% to 4,500 units).
Stock Remains Stable at about 6,000 Units
Supply stock is currently stable at about 6,000 units, but construction starts decreased about 22.2% YoY (in the January to October 2018 period) to 43,784 units.
Saitama prefecture saw strong growth in stock (39.2% YoY), while other areas in greater Tokyo had decreasing stock.
Average Sales Price Remains High
In the first 11-months of 2018, the average sales price for a newly constructed condominium was ¥58,640,00 ($531,00), which was not a significant YoY change. The average price for the same period YoY was ¥58,840,000. This price level is close to the peak reached at the end of the asset bubble, when average sales prices reached ¥59 million in 1991.
Breakdown by area:
High sales prices are forecast to continue in central Tokyo, especially for units in high-rise buildings.
Overall: Sales prices forecast to remain high as developers make a big sales push in the new year
The REEI notes that developers are planning to put in major sales campaigns at the beginning of 2019 and to continue supplying sufficient new construction well into the new fiscal year (which starts in April 2019). Two areas where sales prices are expected to remain high: units in high rise units in central Tokyo and near major hub stations in the suburbs.
The number of developers (companies) supplying properties in greater Tokyo decreased YoY from 122 companies to 112 in the January to November 2018 period.
Developers are focusing on building properties that support child rearing and energy-savings.
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Source: Real Estate Economic Institute (in Japanese)