Tokyo New Apartment Market: 2022 Mid-Year Trend Report

Homebuyers in the greater Tokyo region have been buying apartments at a brisk pace this year, pushing the average sales prices of newly built condominiums up for the first time in two years amidst strong demand and low inventory.

Data from the Real Estate Economic Research Institute (REEI)’s January to June 2022 trends report point to signs of a continuing recovery from pandemic lows but also a market being reined in by undersupply.

Here are the key takeaways from the REEI’s 2022 half-year market trends report for the greater Tokyo region. The greater Tokyo region consists of the Tokyo 23 wards, the Tokyo western suburbs and the prefectures of Kanagawa, Saitama and Chiba.

Low supply…and not forecast to improve this year

In the first half of 2022 (January to June), developers released 12,716 newly constructed condominium units for sale, a year-on-year drop of 4.2%.

This number was well above the number released in the midst of the first part of the pandemic (7,489 units were brought to market from January to June 2020). However, it’s about 5.4% lower than the comparable period in 2019.

The year-on-year drop was concentrated in the Tokyo 23 Wards and Kanagawa and Chiba prefectures.

Supply of newly constructed condominiums in the greater Tokyo region by city and prefecture, source: REEI January to June 2022 Market Trends Report

Total inventory also shrank significantly in the first half of 2022. Inventory ended the period at 5,072 units. This was the lowest number recorded for the end of the month of June since 2015 when inventory stood at 4,936 units.

The supply situation is not forecast to improve this year.

The REEI expects that developers will release about 20,000 newly constructed condominiums for sale in the second half of 2022, which would be a drop of about 1.8% compared to the comparable period in 2021. Total annual supply for 2022 would then come in at about 32,500 units or a decrease of about 3.4% compared to 2021 as a whole.

Sales prices are up amidst strong demand

The average sales price of a new condominium sold in greater Tokyo in the first half of 2022 was ¥65,110,000 ($489,000 USD), a year-on-year increase of 1.5%.

This was also up compared to the average sales price for the 2021 fiscal year. In FY 2021, the average price reached ¥63,600,000, exceeding asset bubble era highs and the highest ever recorded by the Real Estate Economic Research Institute.

The average sales price per square meter was also up 1.6% year-on-year. Both the average sales price and average sales price per square meter were up in the first half of the year for the first time in two years.

By region, only Kanagawa prefecture saw a year-on-year drop in sales prices. Saitama prefecture was up double digits (19.4%) in average sales prices and also up double digits (17.2%) in sales prices per square meter.

Source: REEI January to June 2022 Market Trends Report

Climbing sales prices are one indication that demand is holding strong after being depressed by pandemic-related shutdowns.

Contract Rate

The contract rate for the first six months of 2022 was 72.1%, down 0.4 points compared to the same period last year but in the 70% range for two years running.

The contract rate is the number of units contracted for sale divided by the number of units offered for sale. Seventy percent is considered the dividing line between a seller’s and buyer’s market.

As we noted in the FY2021 market over report, tight supply in the Tokyo metro region and the likelihood of ongoing historically low mortgage rates means that buyer demand will likely remain very strong this year. If so, there seems to be a good likelihood of continued price appreciation.

Average Sales Price of an Apartment in Tokyo – By City & Prefecture in June

Here is the breakdown of average sales prices by area for June 2022 compared to May 2022 and year-on-year.

Source: Real Estate Economic Research Institute, Tokyo new condominium market report, June 2022

Average Sales Price Per Square Meter of an Apartment in Tokyo – By City & Prefecture – June

Here is the breakdown of average sales prices per square meter by area for June 2022 compared to May 2022 and year-on-year.

Source: Real Estate Economic Research Institute, Tokyo new condominium market report, June 2022


Sources:

Lead Image: iStock/joka2000


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