Condominium prices continue to soar
16:20 JST, January 29, 2022
Prices continue to soar for condominiums amid a short supply and historically low interest rates.
With a surge in sales of luxury condominiums that cost more than ¥100 million, the average price of newly built units in the Tokyo metropolitan area in 2021 exceeded the peak figure seen in the years of the economic bubble.
The momentum is spreading to other large cities and also to the market for secondhand properties.
In the Harumi Flag development in Chuo Ward, Tokyo — used as the athletes village for the recent Tokyo Games — the average price of a 70-square-meter condo with a living room, dining room, kitchen and three bedrooms is about ¥60 million. When 631 units went on sale in November last year, they sold out the day they hit the market. The average unit attracted 8.7 applications, and the most popular one received 111 applications.
An earlier batch of Harumi Flag units attracted an average of 2.6 applications when they went on the market in July 2019.
According to the Real Estate Economic Research Institute, the average price of newly built condominiums sold in 2021 in the Tokyo metropolitan area was ¥62.60 million, up 2.9% from the previous year. In Tokyo’s 23 wards, the average price was nearly ¥83 million. In the Kinki region, it was ¥45.62 million, up 9.1% from the same period the previous year.
Brillia Tower Dojima in Kita Ward, Osaka, is a 49-story condo building that also houses the Four Seasons luxury hotel. Despite the fact that the highest price for the condominiums was ¥1.08 billion and their average price was in the ¥150 million range, all the units that went on the market attracted purchase applications.
In Fukuoka City, condominium sales have also been steady. A real estate official said that the more expensive a condominium is, the faster it sells.
Prices of secondhand properties are also rising. According to a survey by Housmart Inc, an information technology company specializing in real estate, the prices of high-rise condominiums in the Tokyo Bay area have increased by an average of 20% in the two years from December 2019. Many secondhand properties are selling for prices exceeding those they commanded when newly built.
Good locations
One reason for the sharp price rises is strong housing demand. Thanks to historically low interest rates, it is now easy to get a mortgage. There are many cases of couples in which each partner takes out a loan so they can buy a condominium without a down payment. Major real estate companies target relatively affluent “power couples” who both work full-time and have a combined annual income of more than ¥14 million.
There is a shortage of condominium supply because real estate firms are carefully selecting locations to build new properties, such as sites close to train stations that are strongly expected to sell well.
The number of newly built condo units for sale in the Tokyo metropolitan area in 2021 was 33,636, about one-third of the peak number seen around 2000. The prices of steel and other building materials are also rising amid a sharp economic recovery from the pandemic around the world.
“Households with an annual income of ¥6 million to ¥8 million, who used to be a target of real estate companies, have given up on buying homes in Tokyo’s 23 wards and are instead looking for condominiums in suburban areas or very small houses,” said Masayuki Takahashi, chief analyst at Tokyo Kantei Co., a real estate research company.
High stock prices
Many experts believe that the prices of condominiums will continue rising. Since condominium prices are relatively low in Tokyo compared to large cities in other countries, there is potential for foreign investment funds to flow in, in anticipation of investment profits.
Real estate prices are likely to move in tandem with stock prices. The Nikkei Stock Average, although it fluctuates, has been at a high level recently.
Fewer good locations for condominiums is another cause for concern. In the Tokyo metropolitan area, one out of every four newly built apartments is already a high-rise condominium. “Land for housing is limited in central Tokyo, and newly built condominiums in redevelopment areas near train stations and the bay area tend to be expensive high-rise properties,” a senior official of a real estate company said.
Ongoing work style reforms in the construction industry can also boost condominium prices. In line with a revision of the Labor Standards Law, a five-day workweek will become mandatory from April 2024. Although necessary to maintain workers’ health, this may raise labor costs as well as the sales prices of condominiums.
"Business" POPULAR ARTICLE
-
Japan’s Kansai Economic Delegation Meets China Vice Premier, Confirm Cooperation; China Called to Expand Domestic Demand
-
Core Inflation in Tokyo Accelerates in November
-
Yomiuri 333 Stock Index Raises Investor Expectations in Japan; Equal Weighting To Provide New Perspective
-
Nissan President Uchida Facing Hard Time on 5 Years After Taking Office; Future of Nissan Uncertain
-
China’s New Energy Vehicles Dominating Domestic Market; Japanese, European Automakers Losing Ground
JN ACCESS RANKING
- Japan’s Kansai Economic Delegation Meets China Vice Premier, Confirm Cooperation; China Called to Expand Domestic Demand
- Core Inflation in Tokyo Accelerates in November
- Yomiuri 333 Stock Index Raises Investor Expectations in Japan; Equal Weighting To Provide New Perspective
- China to Test Mine for Rare Metals Off Japan Island; Japan Lagging in Technologies Needed for Extraction
- Record 320 School Staff Punished for Sex Offenses in Japan