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Japan’s land prices see first rise in two years in COVID recovery

  • March 22, 2022
  • , Nikkei Asia , 4:50 p.m.
  • English Press

TOKYO — Japan’s land prices rose for the first time in two years in 2022, with the national average up 0.6%, according to the officially assessed land value announced by the Ministry of Land, Infrastructure, Transport and Tourism on Tuesday.


The trend reflects a gradual economic recovery after the shock caused by the COVID-19 pandemic. Solid housing demand, spurred by the spread of teleworking, and other factors helped push up prices.


The officially assessed value serves as an index for real estate transactions across the country. As of Jan. 1, 44% of the 26,000 sites surveyed nationwide had increased in value, more than double the previous year’s 19%.


Residential properties rose 0.5%, returning to growth after a 0.4% dip the previous year. The spread of teleworking has pushed up housing demand on the outskirts of cities, as well as in city centers.


In the greater Tokyo metropolitan area, the city of Kashiwa grew 0.4%, its first positive growth in 14 years. Prices grew 1.5% in the city of Saitama and 0.8% in Yokohama.


Industrial areas also rose 2%. The growth of e-commerce, spurred by demand from people staying at home, provided a boost for these areas. Some parts of Ichikawa and Funabashi in Chiba Prefecture, which are considered suitable locations for logistics facilities due to their proximity to Tokyo, experienced high growth of around 20%.


However, commercial areas in urban centers, areas hit hardest by the pandemic, saw prices decline, and a full recovery for these properties remains out of sight.


Commercial land values increased 0.4%, a modest rebound from the previous year’s 0.8% decline. Regional differences also stood out, with Osaka Prefecture dropping 0.2%, the second straight annual decline.


The number of inbound travelers to Japan fell to a record low in 2021 because of strict entry restrictions. Areas that formerly depended heavily on demand from overseas visitors continue to face headwinds.


With the number of commuters down because of the pandemic, office areas are also stagnant. Among Tokyo’s 23 wards, the central wards of Chiyoda, Chuo and Minato fell into negative territory for the second straight year. The other 20 wards were positive, including Nakano, which rose 2.3% due to redevelopment.


The four regional economic centers of Sapporo, Sendai, Hiroshima and Fukuoka rose an average of 5.8% for all land types. The growth rate increased from 2.9% the previous year. People continue to flow in from surrounding areas thanks to redevelopment projects around major stations, creating a virtuous cycle in which increased consumption attracts the next round of investment.


Inflows of investment funding also supported land prices. According to Jones Lang LaSalle (JLL) Japan, a major real estate services company, the amount invested in domestic real estate in 2021 was 4.49 trillion yen ($37.45 billion).


“Office rents have bottomed out in the U.S. and other countries,” said Yuto Ohigashi, a senior director of research at JLL Japan. “Foreign investors are aggressively investing in anticipation of a recovery in the Japanese market.” As interest rates rise in the U.S., Japan — which can raise funds at low interest rates — will become relatively more attractive as an investment destination.


“For the time being, residential areas will continue to see moderate increases, while offices in urban centers are expected to decline slowly,” said Masaaki Sakamoto, a director and senior researcher at Sumitomo Mitsui Trust Research Institute who is an expert on land price trends. “Land prices in commercial areas will recover to their pre-COVID levels only after 2023 when visitors to Japan return to tourist areas and elsewhere.”

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