Japan's land prices fall for first time in three years

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IANS | 30 Sep, 2020
An average price of land in Japan this year fell 0.6 per cent from last year for the first decline in three years as the Covid pandemic caused a drop in land demand for commercial operations such as hotels and shops, government data showed.

Among 21,519 sites surveyed across the country, 60.1 per cent saw their prices fall as of July 1, according to the data released by the Land, Infrastructure, Transport and Tourism Ministry.

Prices rose from a year earlier in 21.4 per cent of the total sites, but the ministry said prices of many of those sites reflected market conditions before the pandemic. Prices were flat in 18.5 per cent of the surveyed spots, the Japan times reported.

The survey covered the average prices for all types of land nationwide, including commercial, residential and industrial.

Supported by an influx of foreign tourists and increases in commercial property rents and investments in the tourism industry such as those for hotel construction, Japan's average price of land had been on a recovering trend, rising in 2018 for the first time in 27 years since the collapse of the country's asset-inflated bubble economy in the early 1990s.

Uncertain prospects of recovery in economic activities are weighing on the country's real estate investment, and it is difficult to tell whether conditions of the real estate market will stop deteriorating anytime soon, the ministry said.

If economic conditions show little improvement in the coming months, more areas will see land price falls by the start of next year as the value of real estate reflects future demand, said Shigeo Hirayama, Director of a private think tank Urban Research Institute.

"Standard land prices are determined based not so much on actual prices at which transactions were made, but more on expectations for a deterioration in profitability resulting from lowering of rents and other factors," Hirayama added.

The average price of commercial land fell for the first time in five years, slipping 0.3 per cent, while that of residential land dropped 0.7 per cent.