Japan Land Prices Rise for the First Time Since 2007 on Tourism

  • Value of commercial land in the three biggest cities up 2.9%
  • Despite gains, prices are still a third of their 1990s peak

Japan’s land prices rose for the first time in eight years in 2015 after low mortgage rates encouraged home purchasing and a booming tourism market lifted values for retail space and hotels.

Nationwide land prices on average gained 0.1 percent, compared with a 0.3 percent decline a year earlier, the Ministry of Land, Infrastructure and Transport said Tuesday. The survey covers the change in land prices over the past year to Jan. 1, 2016.

Land prices have been recovering in Japan’s three biggest metropolitan areas since 2013 after Prime Minister Shinzo Abe introduced measures to boost the economy, including weakening the yen and setting an inflation target that helped lift property values. A weaker yen brought in a record number of inbound visitors, who took up occupancy in hotels and increased spending in shops and restaurants.

The pace of gains in commercial land prices in Tokyo, Osaka and Nagoya accelerated to 2.9 percent from 1.8 percent a year earlier as a surge in tourists from overseas underpinned demand. The most expensive location was in Ginza, a shopping district where the priciest piece of land reached a record high of 40.1 million yen ($358,000) per square meter.

Even with the increase in the 12 months to Jan. 1, land prices are still at one-third what they were at their peak in the 1990s. The bursting of a bubble in the stock market in 1989 was followed by a real estate market bust in the 1990s, which saddled banks with bad loans, plunging Japan into a deflationary slump for more than a decade.

The value of residential land in the three largest cities rose 0.5 percent, from 0.4 percent a year earlier, partly helped by low mortgage rates that encouraged home purchasing.

Japan’s real estate investment trusts that buy and hold properties have expanded from a decade earlier, supporting the property market. The Bank of Japan’s negative interest rate policy introduced in January has pushed up the Tokyo Stock Exchange REIT Index. It gained 10 percent this year, signaling strong demand going forward, said Tomohiro Araki, a REIT analyst at Nomura Securities Co.

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