Ensure Steady Recovery from Coronavirus Pandemic

Land prices are clearly recovering as the impact of the novel coronavirus pandemic eases. With the recovery spreading from major urban to regional areas, it is hoped that a stable rise in land values will eventually provide an overall boost to the economy.

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 rose 1.6% from the previous year for the second consecutive yearly gain. The rate of increase was also 1 percentage point higher than the previous year.

By purpose, commercial site prices rose 1.8%, and residential site prices increased 1.4%, both higher rates of increase.

Japan suffered from asset deflation following the burst of the bubble economy. When land prices go up, the value of owned assets improves, thereby lifting household and business sentiment. It can be said that the rise in land values is a positive factor for the economy as a whole.

This time, the recovery in commercial sites was particularly notable. Demand for retail premises, mainly in urban areas, has grown due to the normalization of economic activities. In many parts of Tokyo’s Ginza and Shinjuku, land prices have turned upward because the flow of people has returned.

Land prices in tourist destinations have also picked up due to expectations of an increase in the number of foreign visitors to Japan. In addition to large jumps in Tokyo’s Asakusa and Kyoto’s Gion district, some locations in regional areas, such as Takayama, Gifu Prefecture, and Izumo, Shimane Prefecture, have also seen their rate of change turn to positive from the previous year’s negative.

If investments in hotels and restaurants in tourist sites thrive again, it will help regional revitalization. It is hoped that the government will strengthen its efforts to attract overseas visitors to Japan’s regional areas, thereby ensuring that the recovery in land prices will continue.

Land values in residential areas, which have been solid even in the midst of the pandemic, have also continued to rise. In addition to urban areas with convenient transportation, the rise is also expanding to suburban areas due to the spread of telecommuting.

There were locations that saw a more than 20% rise in Kisarazu, Chiba Prefecture, and a more than 10% increase in Tsukuba-Mirai, Ibaraki Prefecture, and Chigasaki, Kanagawa Prefecture.

Outside the major metropolitan areas, residential land prices rose by 8.6% in the four major regional cities — Sapporo, Sendai, Hiroshima and Fukuoka. Some locations in Ebetsu, Hokkaido, near Sapporo, logged a nearly 30% rise in prices.

While rising land prices have a positive impact on the economy, they also place a heavy burden on home buyers.

Condominium prices are soaring, with the average price of new units put up for sale in Tokyo’s 23 wards in 2022 topping ¥82 million, 40% above the price in 2013. Prices are also rising in major regional cities, due in part to higher material costs and competition to acquire land.

While price hikes due to growing demand may be inevitable, the government should keep a close eye on the situation to ensure that land values do not soar due to speculative moves.

(From The Yomiuri Shimbun, March 27, 2023)