Japan’s Major Cities Post Land-Price Gains as Deals Rise

Photographer: Noriko Hayashi/Bloomberg

The Roppongi Hills Residences apartment blocks tower over other buildings in Tokyo. Close

The Roppongi Hills Residences apartment blocks tower over other buildings in Tokyo.

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Photographer: Noriko Hayashi/Bloomberg

The Roppongi Hills Residences apartment blocks tower over other buildings in Tokyo.

Land prices in Japan’s three largest cities rose for the first time in five years, signaling a property-market recovery in the world’s third-largest economy.

The average price of land in Tokyo, Osaka and Nagoya gained 0.1 percent as of July 1, compared with a 1 percent drop a year earlier, the Ministry of Land, Infrastructure, Transport and Tourism said in a report released yesterday. The gain was the first since 2008 when it climbed 1.7 percent. The decline in land prices, which have been falling for 22 years, narrowed to 1.9 percent, the slowest pace in five years.

Prime Minister Shinzo Abe’s pledge to end 15 years of deflation and the Bank of Japan’s monetary easing policy, dubbed Abenomics, have helped boost property sales in Japan. Real estate deals in Japan will rise to as much as 4 trillion yen ($40 billion) this year, the most since 2008, according to Jones Lang LaSalle Inc. (JLL)

“Abenomics has lit up a fire in the real estate market,” said Takeshi Akagi, a Tokyo-based director at Jones Lang LaSalle. “This is only the beginning. We will see further improvements next year.”

Commercial land values in Japan’s three biggest metropolitan areas rose 0.6 percent in the year, reversing a decline of 0.8 percent a year ago, the annual land survey report showed. Residential land prices in the cities declined 0.1 percent in the year, narrowing from a 0.9 percent drop a year earlier, according to the report.

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Commercial buildings stand in Osaka. Close

Commercial buildings stand in Osaka.

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Photographer: Tomohiro Ohsumi/Bloomberg

Commercial buildings stand in Osaka.

Property Transactions

Nationwide prices for commercial land fell 2.1 percent, while land prices for residential property dropped 1.8 percent, it showed.

Abe has promised to loosen business regulations and increase government support to help Japan’s industry as part of the “third arrow” of a three-pronged strategy to stem deflation, following fiscal and monetary stimulus.

Sales of offices, warehouses and retail space rose 85 percent to 2 trillion yen in the first half of 2013, heading for the biggest increase in five years, according to Chicago-based broker Jones Lang.

The most expensive piece of commercial property remained in Tokyo’s Ginza shopping district, where land can cost as much as 20.4 million yen per square meter (10.76 square foot). The patch of land posted a 3.6 percent gain from last year, according to the report.

Tax Increase

Prices for commercial land in Tokyo’s metropolitan area gained 0.6 percent, while residential land values fell 0.1 percent.

The Topix Real Estate Index that includes 45 developers fell 0.1 percent in Tokyo, trimming the year-to-date advance to 63 percent. The Tokyo Stock Exchange REIT Index, which consists of 41 real estate investment trusts that pay investors rental income generated from the properties they own, dropped 1.5 percent.

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Residential buildings are seen in this elevated view of Nagoya City. Close

Residential buildings are seen in this elevated view of Nagoya City.

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Photographer: Shinobu Ikazaki/Bloomberg

Residential buildings are seen in this elevated view of Nagoya City.

Property demand is also being fueled by last-minute buyers before the expected increase in consumption taxes. Japan plans to double the sales tax rate to 10 percent from 5 percent by 2015, with the first increase to 8 percent scheduled in April next year.

Housing starts rose for the 11th month in July, the longest rising streak since February 1994, land ministry data showed. The number of apartments offered for sale in Tokyo and surrounding areas gained 53 percent in August from a year earlier, the biggest same-month increase since 1996, according to the Real Estate Economic Research Institute.

Sold Out

Developers are also turning commercial sites into apartments to meet rising demand. Mitsubishi Estate Co. (8802), Japan’s biggest developer by market value, said on Sept. 17 that it sold all 22 apartment units that cost as much as 542 million yen near the Imperial Palace.

In Chiyoda ward, where Mitsubishi Estate’s apartment building is located, residential land costs as much as 2.88 million yen per square meter, the most expensive in Japan, land ministry data showed. The company had acquired the land that was used as the headquarters of Tobishima Corp. (1805), a 130-year-old construction company, in 2011.

“We have started to see signs of recovery,” said Keiji Kimura, chairman of Mitsubishi Estate, in a statement. “In order to end the asset deflation and achieve sustainable growth, we must increase the competitiveness of our major cities and stimulate housing investments.”

To contact the reporter on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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