March 23 (Bloomberg) -- Land prices in Japan’s northeastern region that was damaged by the March 11 earthquake and tsunami last year gained the most in 2011 as residents sought to relocate, the land ministry’s annual land price report showed.
Nine of 10 sites that had the biggest gains in prices were in Miyagi prefecture, where the coast was hit by the tsunami, as demand rose for real estate in inland or elevated places, the Ministry of Land, Infrastructure, Transport and Tourism said in the report yesterday. The biggest gain was in the Shirasagidai area in the city of Ishinomaki, which rose 61 percent to 22,500 yen ($269) per square meter (10.76 square foot).
Japan’s strongest earthquake on record and tsunami damaged more than 1 million homes, spurring housing demand as the nation rebuilds with about 20 trillion yen in relief spending. Nationwide land-price declines narrowed a second year, with the pace slowing to a 2.6 percent drop from 3 percent a year earlier, supported by demand in metropolitan areas including Tokyo, according to the report.
“Japan’s economy will probably strengthen in the next two years, supported by the global recovery and rebuilding demand,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “Nationwide land-price declines will probably ease even further, except for the areas that were the hardest hit, on the back of economic expansion.”
Nationwide average residential land prices fell 2.3 percent last year, compared with a 2.7 percent slide a year earlier, according to the report. Commercial land values declined 3.1 percent in 2011 from a 3.8 percent drop in 2010.
The drop in average land prices in Japan’s three-biggest metropolitan cities -- Tokyo, Osaka and Nagoya -- narrowed to 1.5 percent in 2011 from 2 percent a year earlier.
Even so, economic concerns including Europe’s sovereign debt crisis have had an impact on the country’s land prices, said Keiji Kimura, chairman of Mitsubishi Estate Co., Japan’s largest developer, and the head of the Real Estate Companies Association of Japan.
Housing starts rose 12 percent to 1.6 million in 1996 after the 7.3-magnitude Great Hanshin Earthquake hit parts of western Japan on Jan. 17, 1995, according to government data. Apartments put up for sale in Osaka and its surrounding areas rose 15 percent to 44,430 units that year, according to the Real Estate Economic Research Institute.
“We’re seeing some unusual gains in parts of Miyagi prefecture on expectations for rebuilding demand in the area,” said Yutaka Iwaki, a government official who headed the survey, said at a press conference in Tokyo. “The gains aren’t driven by speculative transactions, but more to do with real demand for relocations.”
Land prices in Tokyo’s bayside neighborhoods, where apartments were built on reclaimed land, fell as much as 15 percent after the 2011 earthquake turned some of the landfill into mud, shattered pipes and severed water supplies.
About half of the 10 sites that had the biggest declines in residential land prices were in Urayasu, the home of the Tokyo Disneyland resort in Chiba prefecture, the government report showed.
The most expensive piece of residential property was in Rokubancho in Chiyoda ward, where the Imperial Palace is located, with land costing 2.78 million yen per square meter, the report showed. Marunouchi Building, also in Chiyoda ward, and a patch in Ginza’s shopping district, were the priciest commercial pieces of real estate at 27 million yen per square meter, the data showed.
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