Japan’s Top Cities Post Land-Price Gains as BOJ Easing Help

(AT Express) – Land prices in Japan’s three largest metropolitan areas increased for a second year and residential prices in the cities increased for the first time in six years as low interest rates lifted demand for properties.

 

The price of land in Tokyo, Osaka and Nagoya gained 0.8 percent on average in the year to July 1 from a 0.1 percent increase a year earlier, the Ministry of Land, Infrastructure, Transport and Tourism said in a report released yesterday. Declines in nationwide land prices, which have been falling for 23 years, narrowed to 1.2 percent, matching the decline six years ago, the report showed.

 

Property demand has picked up in the world’s third-largest economy as the Bank of Japan eased monetary policy, while expectations for increased building of infrastructure ahead of the 2020 Olympic Games in Tokyo are contributing to the recovery. Real estate prices have risen about 20 percent since Prime Minister Shinzo Abe took office about two years ago, according to an estimate by Deutsche Asset & Wealth Management.

 

“The real estate market has remained strong based on real demand and that is being reflected in the land-price data,” said Hirotaka Sugiyama, president and chief executive officer at Mitsubishi Estate Co. (8802), Japan’s biggest developer by market capitalization.

 

Real estate investment in Japan rose 70 percent to 4.6 trillion yen ($43 billion), the highest level since March 2008, in the 12 months ended in March from a year earlier, according to a report published in July by Deutsche Asset.

 

Residential Prices

 

Residential land values in Japan’s three-biggest metropolitan areas rose 0.5 percent in the year, reversing a decline of 0.1 percent a year earlier, the annual land survey showed. Commercial land values in the cities gained for a second year, rising 1.7 percent, compared with a 0.6 percent increase a year earlier.

 

Nationwide prices for commercial land fell 1.1 percent, while land prices for residential property dropped 1.2 percent, according to the report. By contrast, in Tokyo’s metropolitan area, commercial land prices gained 1.9 percent, while residential land values rose 0.6 percent.

 

“We are seeing a revitalization of the real estate investment market,” said Akira Mori, chief executive officer of developer Mori Trust Co. “We are especially seeing a concentration of demand for large-size properties in central Tokyo. The trend will continue if not accelerate.”

 

The most expensive piece of commercial property remained in Tokyo’s Ginza shopping district, where a plot can cost as much as 22.6 million yen per square meter (10.76 square foot). The patch of land posted an 11 percent gain from last year, according to the report.

 

The Topix Real Estate Index that includes 45 developers rose 0.6 percent in Tokyo as of 10:19 a.m. in Tokyo, bringing the year-to-date decline to 19 percent. The Tokyo Stock Exchange (1345)REIT Index, which consists of 46 real estate investment trusts that pay investors rental income generated from the properties they own, fell 0.2 percent.

 

Bloomberg

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