Land prices in Japan fell in the 12-month period to July 1 for the 11th consecutive year, showing larger margins of decline than in the previous year for both residential and commercial properties, according to a government study released Thursday.
According to the annual Land, Infrastructure and Transport Ministry survey, the average price of residential land fell 4.3 percent, compared with 3.3 percent the previous year, while commercial land dropped 7.2 percent, after a 6.6 percent drop the year before.
Thus, the pace of decline has accelerated for a fifth straight year in residential areas and a second consecutive year in commercial zones.
Few signs of a slowdown or turnaround in the trend were seen, except in some prime sites in the central commercial areas of Tokyo and Osaka, according to the survey, which covered land prices at 27,725 designated locations nationwide.
The slide reflects a prolonged economic slump that is undermining the property market with lower demand. If asset values continue to decline and economic deterioration continues, unrealized losses on property assets may swell further in the corporate sector.
This may pressure the government to take fresh steps, such as reviewing all property-related taxes, to stimulate demand, analysts say.
The government has made urban revitalization a priority to halt asset deflation and to help stimulate the national economy. In line with that policy, the land ministry plans to take measures next year that include abolishing the real-estate acquisition tax.
But analysts say such steps may not be effective enough to stimulate demand unless property taxes are overhauled and made less of a burden.
The current systems use taxes that were set during the asset-inflated bubble economy of in the 1980s and early 1990s to restrain speculative trading in properties. Among those, the land value tax and special landholding tax are widely seen as prolonging asset deflation.
According to the latest survey, land prices in Japan’s three largest metropolitan areas — Tokyo, Osaka and Nagoya — dropped 6.8 percent in residential areas, 0.9 percentage point more than in the previous year, and 8.2 percent in commercial areas, the same as the previous year.
In some locations in central Tokyo and Osaka, prices rose because property prices have fallen low enough to create fresh demand for housing, such as condominiums.
In areas where redevelopment and famous foreign retailers are situated, prices either rose or stayed even. But in suburbs, prices continued to fall sharply.
The survey showed prices outside the three metropolitan areas dropped 3.4 percent in residential areas and 6.8 percent in commercial zones, each 0.9 percentage point more than in the previous year.
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