Land prices as of Jan. 1 rose for the third consecutive year, on the back of brisk demand generated by rising foreign visitor numbers and urban redevelopment projects, the National Tax Agency said in its annual report released Monday.
The increase of 0.7 percent on average from a year earlier represented a higher rate of growth for the second year in a row, but the gap between major cities and rural areas continued to widen, according to the report.
A plot in Tokyo’s Ginza shopping district in front of the traditional stationery store Kyukyodo fetched a record ¥44.32 million ($400,000) per square meter, making it the most expensive piece of real estate for the 33rd straight year.
It was the second year in which the price remained above the about ¥36 million posted in 1992 — the last year to feel the effect on land prices of the so-called “bubble economy” of asset inflation from the late 1980s.
Monday’s report showed land prices had climbed in 18 of the country’s 47 prefectures, including Tokyo, Hokkaido, Osaka, Aichi and Fukuoka, compared with 13 last year. The survey covered about 331,000 points across the country and is used to calculate inheritance tax and gift tax.
By prefecture Okinawa saw the sharpest increase, of 5 percent, due to robust demand for hotels, especially in the prefectural capital of Naha. Tokyo came second with a 4 percent rise on demand linked with the 2020 Olympic and Paralympic Games, followed by Miyagi at 3.7 percent aided by ongoing redevelopment in the prefectural capital of Sendai.
Land prices fell in 29 prefectures, with Akita logging the largest decline of 2.3 percent.
“With an influx of investment money into the real estate markets amid worldwide low interest rates, the result showed the solid growth of the Japanese economy,” said Makoto Sakuma, an associate principal researcher at NLI Research Institute.
Some analysts, however, expect Tokyo’s average land price, which has risen for five years in a row, to peak before the Olympics.
According to an NLI Research Institute’s survey covering 113 experts, 45 percent said metropolitan land prices “have already peaked” or “will peak this year,” while 32 percent anticipate they will “by 2019” and 13 percent “by 2020.”
“The potential massive supply of apartments or condominiums near central Tokyo after use for the athletes’ village also makes it difficult to predict the outlook,” Sakuma added.
Takeshi Ide, senior chief economist at property research company Tokyo Kantei Co., points to differences between the situation now and that seen during the asset-inflated bubble economy, when the value of properties in the suburbs of large cities also went on rising.
“In the three metropolitan areas of Tokyo, Osaka and Nagoya, first-rate locations such as areas near stations are pushing up overall land prices,” Ide said.
Niseko Kogen Hirafusen street in the town of Kutchan in Hokkaido became the site of the sharpest price rise for the fourth consecutive year, at 88.2 percent, amid strong demand for accommodation from overseas tourists visiting the popular ski resort area.
The agency’s report continued to show no values for land in parts of Fukushima Prefecture designated as evacuation zones following the 2011 nuclear disaster.