Will latest land price trends help redress excessive focus on Tokyo?

The novel coronavirus pandemic has put a brake on the rise in land prices, but the extent of the impact varies according to the purpose of the land and the region. The government needs to examine these trends closely.

According to official land values as of Jan. 1 released by the Land, Infrastructure, Transport and Tourism Ministry, the national average value of land for all purposes fell by 0.5% from a year earlier, the first decline in six years. Prices in commercial areas were down for the first time in seven years, and in residential areas for the first time in five years.

By region, both commercial and residential land prices declined in all three major metropolitan areas: Tokyo, Osaka and Nagoya.

Land prices are also an indicator of economic vitality. Since the collapse of the bubble economy, Japan has suffered from “asset deflation.” It would be undesirable for the decline in land prices to be prolonged.

The drop was particularly noticeable in the prices for commercial land, which are vulnerable to economic trends.

Locations in Chuo Ward, Osaka, saw some of the highest rates of decline for commercial land prices. In areas such as Dotonbori, which used to be crowded with visitors from overseas, real estate investment in highly profitable drugstores and other shops is believed to have decreased.

In Tokyo, the decline was severe in areas where eating and drinking establishments are concentrated, such as Ginza and Kabukicho.

Demand for land for hotels is declining in various parts of the country, and many local tourist spots have also seen their land prices fall.

However, the overall rate of decline was smaller than that after the collapse of U.S. investment bank Lehman Brothers in 2008.

This may be because the stock market is strong, and due to “surplus funds” caused by global monetary easing, the situation in which funds flow easily to real estate has not changed.

Land values have not dropped very much in areas such as Marunouchi in Tokyo, where many office buildings are located. In major regional cities such as Sapporo, Sendai and Fukuoka, prices have been rising, mainly due to redevelopment projects.

In the town of Kutchan, Hokkaido, known for the Niseko ski resort, there are areas where prices rose by more than 20%, although growth has slowed. The central government should keep an eye on speculative moves by foreign companies and others.

The price decline in residential areas was smaller than in commercial areas.

Prices continue to rise in areas close to Tokyo — in the prefectures of Saitama, Chiba and Kanagawa. There reportedly are other locations where land prices rose on a year-on-year basis, in the vicinity of the train stations of Karuizawa in Nagano Prefecture, which is known for its vacation homes, and of Atami in Shizuoka Prefecture. Residents living near these stations can commute to Tokyo by Shinkansen trains.

According to the Internal Affairs and Communications Ministry, since July last year, the number of people who have moved out of Tokyo has exceeded that of those who have moved in. The spread of telecommuting may be contributing to this phenomenon.

It is important for each local government and company to devise ways to diversify work styles and workplaces in order to correct the excessive concentration of people and administrative functions in Tokyo.

— The original Japanese article appeared in The Yomiuri Shimbun on March 24, 2021.