Official Land Prices Rising: Link Stable Recovery to Virtuous Economic Cycle

Editorial

15:05 JST, March 27, 2024

Land prices are increasingly on an upward trend nationwide. This is mainly due to strong housing demand and an increase in the number of foreign visitors to Japan. As with overall prices and wages, it is hoped that stable increases in land prices will be linked to economic vitalization.

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 2.3% from the previous year for the third consecutive yearly gain. The rate of increase was 0.7 percentage points higher than the previous year.

Residential land prices rose 2% and commercial land prices rose 3.1%, both of which were accelerated rates of increase.

The pickup in urban areas was noticeable, with most land prices in the three major metropolitan areas of Tokyo, Osaka and Nagoya, plus the four major regional cities of Sapporo, Sendai, Hiroshima and Fukuoka, returning to their pre-pandemic levels.

Conditions have been created for a virtuous cycle in the Japanese economy with accelerated wage increases. The recovery of land prices, accompanied by real demand, can be expected to support this trend.

In residential parts of the Tokyo metropolitan area, the rates of increase were high in Tokyo’s 23 wards, where condominium prices have continued to soar, and also in places such as the Chiba Prefecture cities of Ichikawa, Kashiwa and Nagareyama. The main reason for this is the convenience of transportation.

There were also large land price increases in places such as Utsunomiya, the capital of Tochigi Prefecture, where a next-generation light rail transit system has opened, and in Yokohama’s Hodogaya Ward, where the interconnection of private railways has made the area more convenient.

It is essential for local governments to promote their distinctive regional development, through such measures as facilitating traffic networks and shaping environments that are conducive to childrearing.

In commercial areas, redevelopment and an increase in the number of visitors to Japan are pushing up land prices. In addition to Sapporo and Fukuoka, Takayama in Gifu Prefecture also saw high rates of increase.

Land price increases related to the construction of semiconductor factories are also notable.

In the vicinity of the town of Kikuyo, Kumamoto Prefecture, where a Taiwan company that is the world’s largest contract semiconductor manufacturer has built a plant, and in Chitose, Hokkaido, where Rapidus Corp., a Japanese company aiming to manufacture cutting-edge semiconductors, is building a plant, increases in the 20% to 30% range could be seen.

Demand for land for housing for employees and offices of affiliated firms has been strong. The past promotion of industrial offshoring has contributed to the decline of local economies. It is hoped that new factory locations will lead to regional revitalization.

On the other hand, the Bank of Japan has lifted its negative interest rate policy, which means that mortgage rate increases and other factors could cool real estate demand in the future. It is necessary to keep a close eye on how “a world with interest rates” will affect land prices.

While the recovery in land prices has spread to regional areas, there are some areas that continue to see land prices trending down due to population decline, making clear again the polarization of land prices. In such areas, town planning that is tailored to the actual situations, such as a shift to compact cities where urban functions are concentrated, is required.

(From The Yomiuri Shimbun, March 27, 2024)