The average price of a plot of land in Japan fell by 0.4% year-on-year, the second consecutive year in which land prices have fallen, after three years of steady growth (2017 to 2019). However, the rate of decline in the 2021 survey is slower than in 2020 (when land prices fell 0.6%) as some regional cities begin to reverse.

The malaise is directly related to the border situation. Foreign tourists have been expelled from the country to slow down the spread of demand for the coronavirus and tourist real estate (shops and hotels) has fallen sharply as a result; this is especially pronounced in Osaka.

However, the data also shows that office demand in central Tokyo locations remains stable compared to retail demand. There have also been transactions by foreign investors who have been bargain hunting for commercial land sold by companies trying to bolster their balance sheets. The bottom line here is that Tokyo’s commercial land is seen as having the potential to provide stable yields.

Until the pandemic, land prices in Japan had a slow upward trend that started in 2018, when the national average land price rose for the first time in 27 years since the asset bubble burst in the early 1990s.

This data comes from the latest standard land price from the Ministry of Land (Standard land price, kijun chika) research from July 1, with research results on September 20; Across the country, 21,443 locations were surveyed.

Commercial Country

The average price of commercial land fell 0.5% year-on-year, a sharper decline than 0.3 percent last year; and commercial land prices fell in 41 of the country’s 47 prefectures, compared with 36 prefectures the previous year.

By region, average commercial land prices in the Osaka area fell for the first time in nine years, with Dotonbori district, a major tourist destination, in Osaka falling 18.5%, the largest drop among commercial land in the entire country.

Commercial sites outside the three metropolitan areas also saw a 0.7% decline.

However, commercial land prices rose in Nagoya, reversing a fall in 2020. The Tokyo metropolitan region and the regional cities of Sapporo, Sendai, Hiroshima and Fukuoka continued to see their commercial land prices rise, mainly due to the expected effects of ongoing urban redevelopment projects.

Residential land

Average residential land prices across the country fell 0.5% yoy, down from 0.7% in 2020. In all, 38 prefectures saw residential land prices fall, compared to 42 the previous year. This is caused by consumers remaining cautious amid weak working and wage conditions.

However, seven prefectures saw house prices rise, compared to five last year:

The MLIT report points to the backdrop of low mortgage interest rates that are helping to support home buyer demand. Housing prices near major train stations remain strong.

In both the Tokyo and Nagoya metro regions, housing land prices rose in 2021, compared to a decline in 2020.

Of the sites surveyed, the island city of Miyakojima, in Okinawa Prefecture, registered the highest price increase for residential land at 22.9%, driven by resort development.

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Source: Japan Ministry of Land, press release on Q2 kijun chika (PDF in Japanese), September 20, 2021

Main photo: Enoshima Island, Kamakura, via iStock 031458576