Land prices show signs of life

According to a March 21 report by the land, infrastructure and tourism ministry, as of Jan. 1 land prices are showing signs of stabilizing. If the government adopts the right policies, the speed at which land prices recover may accelerate. But this will not happen if people feel that the real economy is not improving.

Average land prices across the country fell 1.6 percent in residential areas and 2.1 percent in commercial areas in the 12 months to Jan. 1. But the range of drop was 0.7 percentage point and 1.0 percentage point smaller, respectively, than the corresponding land price drops a year before. Of the 26,000 sites covered by the survey, land prices rose in about 2,000 places, compared with some 550 places as of Jan. 1, 2012.

In the three megalopolis regions of Tokyo, Nagoya and Osaka, land prices declined less than 1 percent on average — 0.6 percent for residential areas and 0.5 percent for commercial areas. In Nagoya, residential area land prices leveled off. Elsewhere, residential areas saw a 2.5 percent fall in land prices and commercial areas a 3.3 percent fall.

Land price rises were mainly seen in the three megalopolis regions. Of the 1,501 places in residential areas where land prices went up, 993 were in the three regions. Of the 475 commercial places in commercial areas which registered land price increases, 334 were in the three regions.

What is conspicuous is that residential areas in Miyagi Prefecture — which along with Iwate and Fukushima were greatly damaged by the 3/11 disasters —registered an average land price rise of 1.4 percent — the highest in the nation — due to strong housing demand connected with the progress of reconstruction from the effects of the disasters.

In particular, land prices in highland areas in the three prefectures are rising as people seek to build houses in places safe from the threat of tsunamis. At one location in Ishinomaki, Miyagi Prefecture, the price of land rose 23.6 percent.

Among the factors contributing to higher land prices are the following: People may be rushing to buy residences before the consumption tax rate rises from the current 5 percent to 8 percent in April 2014 or to hedge against an expected rise in interest rates. Monetary easing by the Bank of Japan under the Abe administration’s reflationary policy may be increasing demand for land. Adequate care must be taken to prevent real estate bubbles, especially in urban areas.

Stock prices are rising and the yen has weakened, but the government must realize that if these factors do not lead to an increase in personal income and better business results, demand for housing and office spaces will not significantly expand.

Irrespective of land price movements, it will be important to implement policies to improve land-use practices.