Monetary easing lifts land prices

The results of land price surveys carried out by prefectural governments as of July 1 show that the monetary easing pushed by the Abe administration through Bank of Japan operations is gradually raising land prices in some urban areas. The government should take care so that its policy does not create economic bubbles and that the gap in economic activities between large urban areas and the countryside will be narrowed.

The national land and infrastructure ministry on Sept. 19 said that land prices in commercial areas in Tokyo, Osaka and Nagoya as of July 1 rose an average 0.6 percent from a year earlier, the first rise in five years, while land prices in residential areas in these megalopolises almost leveled off, with a 0.1 percent decline.

If land prices are compared in spots covered by both the July 1 surveys and surveys carried out Jan. 1, land prices went up in both commercial and residential areas in the three megalopolises while corresponding land prices in other parts of Japan saw the margin of drops greatly reduced in the half-year period.

The biggest contribution to the rise, or to the narrower margin of decline, in land prices is the monetary easing pursued by the BOJ. Rises in stock prices have contributed to increasing the desire among many people and enterprises to invest in real estate.

More funds are being used in land transactions because of expectations that land prices will go up thanks to economic recovery. Purchases of office space and condominiums through real estate investment trust have increased. It is also reported that the cheap yen is encouraging overseas investors to increase the amount of their real estate investments in Japan.

Demand for housing is strong. In urban areas, transaction in both new and old houses and condominiums is brisk. Housing starts in terms of the number of residential units have been on the rise for 11 consecutive months through July.

But land price rises are occurring only in major urban areas like Tokyo, Osaka, Nagoya, Fukuoka and Sapporo. People in smaller cities and rural areas are not seeing improvements in economic conditions. In areas outside Tokyo, Osaka and Nagoya, land prices in commercial areas have been falling for 22 consecutive years and those in residential areas for 21 consecutive years. People are moving out of these areas to larger urban areas to get jobs.

There is now concern that Tokyo’s hosting the 2020 Summer Olympics will further widen the economic gap between Tokyo and the countryside.

One way to revive the countryside would be to develop local sightseeing resources with an eye toward attracting visitors from both inside Japan and abroad. Local governments also should carry out attractive urban planning to lure companies and people while improving anti-disaster measures.

The central government, meanwhile, should begin preparing to cope with a possible sharp drop in demand for housing after the consumption tax rate is raised to 8 percent from the current 5 percent in April 2014.