Standard Land Price for Tokyo in 2018 sees a 6 year consecutive increase

Poste date: Friday, September 21, 2018

Standard Land Price for Tokyo in 2018 sees a 6 year consecutive increase; Steady demands of active foreign tourists, Effect of on-going redevelopment projects, Price rise is increasing in commercial area.

On September 18th, the Ministry of Land, Infrastructure, Transport and Tourism announced the standard land prices for their selected points nationwide. On the same day, the Tokyo Metropolitan Government also announced the land prices of the selected locations in Tokyo. The standard land price (*later explained in more detail) is the price of land per 1 square meter for each selected point as of the 1st of July every year.

The average increase in price for land (for all usages) in Tokyo is up 3.7% from last year. This is a 6 year consecutive increase and is 0.7% higher than the last year’s increase.

5.9% is the average increase in the Commercial Areas. This increase is mostly based on a significant price increase in the areas attracting foreign visitors, such as Kabukicho, Shinjuku-ku and Asakusa, Taito-ku. In these areas, the construction of new hotels is currently planned. In the areas around Shibuya Station, many building complexes will be opening within the next few years. In Residential Areas the price rise trend has been dispersed continuously to the suburban wards since last year.

Commercial Area

The average price in Tokyo has risen by 5.9% making this year’s price increase 1.0% higher than last year’s. This year’s average price increase within the 23 wards of Tokyo is 7.2%, which is 1.3% higher than last year’s 5.9% increase from the year before.

The highest price increase to be recorded this year is an increase of 20% for 1-chome, Kabukicho, Shinjuku-ku. The 2nd and 5th highest increases recorded this year are for the Asakusa area in Taito-ku, an area known for attracting many foreign tourists. The 3rd and 4th highest increases recorded this year are in the Shibuya area; the increase is based on the “redevelopment effect”.

The highest price point–remaining unchanged from the previous year–is the Meijiya Ginza Building at 2-6-7, Ginza, Chuo-ku. The price, 41,900,000Yen per square meter (38,000,000Yen in 2017) is a 2 year consecutive record high price. This 2 year consecutive record high price has surpassed its previous peak price during the bubble economy in 1991 (38,000,000Yen).

Residential Area

The average price increase within Tokyo is 2.4%, which is a 0.6% increase from last year (2017). The results from this year’s survey shows that 3 of central Tokyo’s wards (Chiyoda, Chuo, and Minato) have dropped out of the Top 10 ranking of average price increases in Tokyo this year. It also shows that the land prices within Central Tokyo have just about peaked as the increase in prices is slowing down. In contrast, in the outskirts of Tokyo, where there is convenient transportation access, land prices are expected to continue increasing.

The average standard land price for Residential Areas in Tokyo has continued to increase for the past 6 consecutive years. However, there is variation in the rate at which some of the residential area’s land prices are increasing. The increase in the average price for all wards has gone up from 3.3% to 4.3%. The highest increase in price for residential areas this year was 8.7% in Arakawa-ku (5.3% in 2017), followed by 7.2% in Kita-ku, and 6.9% in Bunkyo-ku.

In Central Tokyo the price of condos has almost plateaued, indicating that the inflation of land price is slowing down. In the suburbs, with convenient transportation access, the land price has shown further inflation. As a result of the land price inflation in the suburbs, wards such as Kita-ku, Sumida-ku, Itabashi-ku, and Adachi-ku have joined the central wards of Chiyoda-ku, Chuo-ku, and Minato-ku in the category of wards with an average land price increase of 5%. Among the central the wards in this category, only one piece of land, within Shinjuku-ku, is in the Top 10 price rankings (9th).

Land Prices

The biggest change in this year’s standard land prices (as of July 1st) announced by the Ministry of Land, Infrastructure and Transport, is that the national land price average for all land usages has risen for the first time in 27 years. It can be observed that the deflation of land prices in Japan is over and Japanese land prices are reaching a new stage of their upward trend.

It has been observed that 2 major factors have contributed to the upward trend in land prices. One of them is an active demand for office space. Backed by good business performance, many companies are continuously relocating and expanding their offices to improve their work environment. The second is that the vacancy rate of office buildings is declining and office space rent is gradually increasing.

The early market forecast in 2018 predicted that a large supply of office buildings and spaces in Central Tokyo would ease the demand for office space. Contrary to this prediction, since the beginning of this year, there has been an increase in demand for office space. Another factor having an effect on the price increases is and active demand for foreign tourists. The strong tourist demand contributes to the demand for more stores and redevelopment, and in turn pushes up the profitability of land and land prices in commercial areas.

While the end of land price deflation may be favorable for the Japanese economy, there is a viewpoint in the market that the land price level is entering into an early warning stage. Some land prices for Commercial Areas in Central Tokyo have already exceeded their price levels from 2008, just before the Lehman shock. Many residential prices in Tokyo’s wards have already peaked with housing demand hardly being able to catch up with such high price levels. If the good business performance of companies does not result in a continuous rise in pay to its employees, housing sales may slow down.

Another concern is the influence of natural disasters on foreign traveler demand. Natural disasters affecting this demand are heavy rain and typhoons in West Japan, and earthquakes in Hokkaido during this summer. The influence of these disasters has not been calculated in this year’s standard land price evaluation. If the negative influence of natural disasters on foreign traveler demand continues, it may throw stunt the recovery of land prices.

Ranking by Amount of Price Increase Top 5 points(23 Wards)

A increase of more than 10% in the rising of land prices has been shown in Asakusa’s and Shibuya’s Commercial Areas. The current trend shows that the suburbs in Residential areas are rising in price.

  Address of Price Point Price(1000Yen/㎡) Fluctuation(%)
Commercial Area ➀ 1-18-9, Kabukicho, Shinjuku-ku 6,960 20.0
➁ 1-29-6, Asakusa, Taito-ku 1,650 15.4
➂ 3-29-20, Shibuya, Shibuya-ku 4,450 14.1
➃ 2-29-19, Dogenzaka, Shibuya-ku 13,000 14.0
➄ 2-13-10, Nishiasakusa, Taito-ku 1,190 13.3
Residential Area ➀ 4-19-9, Nishi-Nippori, Arakawa-ku 577 10.1
➁ 2-21-2, Arakawa, Arakawa-ku 524 6.1
➂ 8-4-7, Minami-Senju, Arakawa-ku 553 8.4
➃ 3-22-7, Ayase, Adachi-ku 520 8.3
➄ 5-26-7, Toyo, Koto-ku 535 8.1

(Source for data: Bureau of Finance *Round off to one decimal place) 
* Reference source: Nihon Keizai Shimbun

*What is the Standard Land Price?

The standard land price is the price of land per 1 square meter and is calculated for each selected point of land as of the 1st of July each year. The Prefectural Governments are responsible for its survey and the Ministry of Land, Infrastructure, Transport and Tourism release the nationwide results. It is one of the two major representative data that shows the fluctuation of land price along with the official land price that is announced on Jan.1 every year.

The standard land price is the price of land per 1 square meter and is calculated for each selected point of land as of the 1st of July each year. The Prefectural Governments are responsible for its survey and the Ministry of Land, Infrastructure, Transport and Tourism release the nationwide results. It is one of two major pieces of representative data showing the fluctuation of land price, along with the official land price, and its results are announced on the 1st of January of each year.