Japan’s land prices dropped at a slower pace for a third year as low interest rates and tax incentives supported housing demand while the nation’s real estate investment trusts increased property acquisitions.
The nationwide average price slid 2.7 per cent as of July 1, compared with a 3.4 per cent decline a year earlier, the Ministry of Land, Infrastructure, Transport and Tourism said in a report released today. Prices have fallen for 21 years, according to the report.
The drop in land values, which are about half of what they were after the peak of Japan’s bubble economy in the 1980s, may continue to ease. Assets acquired by Japanese REITs have expanded at the fastest pace in four years, according to Sumitomo Mitsui Trust Research Institute Co., while nationwide apartments put up for sale may increase for a third year, Real Estate Economic Institute Co. said in a report.
“We can see signs of a recovery in the property market,” said Keiji Kimura, the chairman of the Real Estate Companies Association of Japan as well as Mitsubishi Estate Co. “The sites where prices rose or were unchanged have increased as those that declined fell at a slower pace.”
The drop in commercial land prices narrowed to 3.1 per cent from 4 per cent a year earlier, while the decrease in residential value slowed to 2.5 per cent from 3.2 per cent, the land ministry’s data showed.
Declines in prices in Tokyo, Osaka and Nagoya, the three major metropolitan areas, slowed to 1 per cent, from a fall of 1.9 per cent a year earlier, according to the report. Prices in rural districts slipped 3.4 per cent from the 4 per cent slump a year earlier.
The most expensive piece of commercial property remained in Tokyo’s Ginza shopping district, where land can cost as much as ¥19.7 million (Dh900,000) per square metre, the report showed. Tokyo’s Chiyoda ward, where the Imperial Palace is located, had the nation’s priciest residential land at ¥2.78 million yen (Dh130,000) per square metre (10.76 square foot).
Properties bought by J-REITs rose 8.8 per cent to ¥8.7 trillion ($111 billion or Dh408 billion) as of June 30 from a year earlier, according to Sumitomo Mitsui Trust Research Institute, a Tokyo-based consulting company.
Japan’s government expanded rebates for homebuyers in 2009 to boost sales, giving a 10-year tax break on properties bought before 2014. Prospective home buyers in the country have also benefited from the world’s lowest financing costs with the Bank of Japan’s near-zero interest rates.
Parliament last month approved a doubling of the nation’s sales tax to 10 per cent by 2015 to cope with swelling social welfare costs and slow the increase of the fiscal burden.
The tax increase may drive short-term demand while the outlook in the long run remains unclear, said Takashi Ishizawa, a Tokyo-based real estate analyst at Mizuho Securities Co.
“Demand for residential land will remain firm as home buyers rush to make their purchase prior to the tax increase,” said Ishizawa. “It is not clear how long that trend will continue.”
