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Japan Top Cities Post Land-Price Gains for First Time in 5 Years

Land prices in Japan’s three largest cities rose for the first time in five years, signaling a return of confidence among homebuyers and investors.

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 today. The gain was the first since 2008 when it climbed 1.7 percent. The decline in nationwide land prices, which have been falling for 22 years, narrowed to 1.9 percent, the smallest in five years.

Low interest rates and a return of consumer confidence that rose to the highest level in six years after Prime Minister Shinzo Abe’s pledge to revive the economy have led to an increase in property transactions. Real estate deals in Japan will rise to as much as 4 trillion yen ($41 billion) this year, the most since 2008, according to Jones Lang LaSalle Inc. (JLL)

“We have started to see signs of recovery,” said Keiji Kimura, chairman of Mitsubishi Estate Co. (8802), Japan’s biggest developer, 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.”

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.

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

Property Deals

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 end 15 years of deflation, following fiscal and monetary stimulus. The policies, dubbed Abenomics, have helped boost property transactions in the world’s third-largest economy.

Sales of offices, warehouse 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 LaSalle.

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 increase from last year, the report showed.

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

The Topix Real Estate Index that includes 45 developers rose 4.1 percent at the close of trading in Tokyo, bringing the year-to-date advance to 63 percent. The Tokyo Stock Exchange REIT Index, which consists of 41 real estate investment trusts that pays investors rental income generated from the properties they own, gained 2.6 percent, the highest since May 22.

The land price data came out after the market closed.

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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