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Japan’s Top Cities Post First Land-Price Gains Since 2008

Construction site in Tokyo
Excavators operate on a construction site in Tokyo. The value of land on average in Japan’s three-biggest metropolitan cities -- Tokyo, Osaka and Nagoya -- rose 0.7 percent on average as of Jan. 1, compared with 0.6 percent of decline a year earlier, the Ministry of Land, Infrastructure and Transport said today. Photographer: Akio Kon/Bloomberg

March 19 (Bloomberg) -- Land prices in Japan’s three largest metropolitan areas gained for the first time in six years amid efforts by Prime Minister Shinzo Abe to revive the world’s third-largest economy.

The value of land in Tokyo, Osaka and Nagoya was on average 0.7 percent higher as of Jan. 1 from 12 months earlier, compared with a 0.6 percent decline in the previous year, the Ministry of Land, Infrastructure and Transport said yesterday. The increase was the first since 2008 when prices rose 5.3 percent in those areas, the data showed.

Real estate investments have picked up since Abe pledged to end 15 years of deflation and the Bank of Japan embarked on an unprecedented monetary easing, an approach dubbed Abenomics. The nation’s real estate investment trusts, or J-REITs, bought property worth 2.23 trillion yen ($22 billion) in 2013, making them the biggest buyers of the assets, according to the Association for Real Estate Securitization.

“Land prices will probably continue to rise in the medium term,” said Akira Mori, chief executive officer of Mori Trust Co., a closely held developer. He cited below-average office supply, rising rents and investments at home and abroad as reasons for a recovery.

Nationwide land prices on average fell 0.6 percent as of Jan. 1, compared with a 1.8 percent decline a year earlier, the land ministry said. The drop was the smallest over the last six years, the data showed. Values declined 1.7 percent on average in non-major cities, falling for 22 years straight, it showed.

Residential Prices

Residential land prices in the three major cities rose 0.5 percent, compared with a 0.6 percent drop a year earlier, the report showed. Commercial land values in the regions gained 1.6 percent after declining 0.5 percent a year earlier.

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

“We have started to see effects such as an improvement in sentiment from Abenomics,” said Keiji Kimura, chairman of Mitsubishi Estate Co. and the head of the Real Estate Companies Association of Japan. “We continue to see signs of recovery.”

The Topix Real Estate Index, tracking 45 property companies, rose 0.4 percent at the close of trading in Tokyo. It has declined 21 percent this year.

Tokyo Bay

Residential prices rose in Tokyo’s central three wards, the report showed. They climbed as much as 8.7 percent in Tokyo’s Chuo ward, which includes part of Tokyo Bay and some of the 2020 Olympic Games venues. In Chiyoda ward, where the Imperial Palace is located, values rose 6 percent, while in Minato ward, home to the Roppongi Hills complex that houses companies including Goldman Sachs Group Inc., they increased 5.9 percent.

In some parts of Kawasaki city and Yokohama city near Tokyo values increased about 3 percent, it showed.

Nationwide apartment sales rose for a fourth straight year, gaining 12 percent to 105,282 units in 2013 from a year earlier, according to Real Estate Economic Institute Co. Apartment prices on average increased 9.2 percent to 41.7 million yen per unit, it showed.

Condominiums offered for sale in Tokyo and surrounding areas fell 24.1 percent in February to 2,651 units from a year earlier, in part because of heavy snow during the month, Real Estate Economic Institute said in a separate report today.

Commercial Property

The nation’s commercial real estate market is also showing signs of a recovery. Office vacancies, a measure of unoccupied space, in Tokyo fell to 7.01 percent in February from 8.57 percent a year earlier, according to brokerage Miki Shoji Co.

Tokyo’s average rents for grade-A offices, or those considered to be the most stable, high-income producing properties, will rise about 10 percent this year, according to an estimate by Jones Lang LaSalle Inc.

The most-expensive piece of commercial property remained in Tokyo’s Ginza shopping district in Chuo ward, where land costs as much as 29.6 million yen per square meter. The area posted a 9.6 percent gain from a year earlier, according to the report. Marunouchi Building, in Chiyoda ward, had the second highest land value, commanding 28.7 million yen per square meter, the report showed.

To contact the reporters on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net Tomoko Yamazaki, Iain McDonald

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