The biggest Olympic beneficiaries? Tokyo Bay developers

Bloomberg

Tokyo Bay area property prices stand to benefit the most in the lead-up to the 2020 Olympic Games, adding to the recovery in the capital’s real estate values after 20 years of declines.

About 90 percent of the competition venues will be located within 8 km of the Olympic Village in Harumi, an area of reclaimed land about 3.2 km southeast of central Tokyo, according to the Tokyo 2020 Bid Committee.

Apartment prices in the area may increase by as much as 20 percent, said Sanyu Appraisal Corp., a property appraisal company.

Tokyo’s victory coincides with a recovery in the nation’s property market, where residential prices have been declining since 1992, amid expectations that Prime Minister Shinzo Abe’s policies will end 15 years of deflation.

Just as the Summer Olympics in 1964 helped turn vast, empty tracts of land in Komazawa into a residential neighborhood in central Tokyo today, the 2020 Games will help Tokyo Bay real estate, said Deutsche Securities Inc.

“With the improvement in infrastructure, such as parks, stadiums and transportation, the property values in the bay area may increase dramatically,” Yoji Otani, a Tokyo-based analyst at Deutsche Securities, said without giving an estimate. “There are just idle land sites in the Harumi area. It will be like turning something that’s not worth anything into gold.”

Apartment prices in Harumi, at about ¥828,000 per sq. meter, are below the average of ¥868,000 per sq. meter in Tokyo’s 23 wards, according to the Real Estate Economic Research Institute Co. That compares with ¥877,000 per sq. meter in Komazawa, where the previous Summer Olympics were held.

Tokyo outpolled Istanbul 60-36 in a runoff vote among members of the International Olympic Committee meeting in Buenos Aires over the weekend. The 2020 Olympics will mark Japan’s fourth time as host, after the 1964 Tokyo Summer Games and the Winter Games in Sapporo in 1972 and Nagano in 1998.

The capital is planning its biggest housing complex in 42 years to lodge athletes in Harumi. The ¥95.4 billion Olympic Village complex will occupy a 44-hectare parcel of land next to Tokyo Bay and will be financed by developers, Kenichi Kimura, who oversees the finances for the city’s bid at the Tokyo Metropolitan Government, said in an interview in July.

The Olympic Village complex, which is to be located in the middle of two main competition zones, will consist of luxury apartments surrounded by the bay with a view of Rainbow Bridge, which connects central Tokyo with the Odaiba area, the bid documents show.

It will comprise 10,860 residential units spread across about two dozen buildings, along with training gyms, dining halls, seaside restaurants and parks, according to the bid documents. The economic effect on the construction industry will be about ¥475 billion, while the property sector will lure ¥152 billion, the IOC estimates.

“We expect further development of Tokyo Bay to particularly benefit land owners” in Tokyo Waterfront City, Peter Eadon-Clarke and Nat Ishino, analysts at Macquarie Securities Ltd., said in a report published last month.

Residents in Tokyo Waterfront City are expected to quadruple to 47,000 in 2016 from 11,030 in 2010, while the working population will double to 90,000 from 47,000 over the same period, according to an estimate by Macquarie and the metropolitan government.

“The Olympic Games may attract a new wave of investors to housing in the bay area, such as those who live outside of Tokyo,” said Daisuke Fukushima, an analyst at Nomura Securities Inc. “That will push up property prices.” He didn’t give an estimate for how much he expects prices to rise.

Residential land prices in Tokyo have been falling in the last two decades, except in 2007 and 2008, according to the land ministry. The decline narrowed to 0.7 percent as of this Jan. 1, from 1.6 percent last year.

Not all expect Tokyo’s victory to help boost prices.

If wages don’t increase, neither may apartment prices, said Curtis Freeze, chief investment officer at Prospect Asset Management in Tokyo. Wages excluding bonuses and overtime dropped for a 14th straight month, according to Health, Labor and Welfare Ministry data released Sept. 3.

“The price of land will go higher,” said Freeze, but the question is whether developers can increase prices to recoup the higher land costs.

  • Digger

    At projected ticket prices from 25,000 to 150,000 yen plus transportation expenses from my home in Aichi ken, I won’t be taking my family of four. Just don’t spend my tax money on this.

  • John Grey

    Digger,
    good thinking, did you send your request about your taxmoney to the government?
    I found nothing new in that article… I mean, what on earth does anyone think, for whose interest any Olympics are brought to any city in the world?