An average price of land in Japan this year fell 0.6 percent from last year for the first decline in three years as the coronavirus pandemic caused a drop in land demand for commercial operations such as hotels and shops, government data showed Tuesday.
Among 21,519 sites surveyed across the country, 60.1 percent saw their prices fall as of July 1, according to the data released by the Land, Infrastructure, Transport and Tourism Ministry.
Prices rose from a year earlier in 21.4 percent of the total sites, but the ministry said prices of many of those sites reflected market conditions before the pandemic. Prices were flat in 18.5 percent of the surveyed spots.
The survey covered the average prices for all types of land nationwide, including commercial, residential and industrial.
Supported by an influx of foreign tourists and increases in commercial property rents and investments in the tourism industry such as those for hotel construction, Japan’s average price of land had been on a recovering trend, rising in 2018 for the first time in 27 years since the collapse of the country’s asset-inflated bubble economy in the early 1990s.
Uncertain prospects of recovery in economic activities are weighing on the country’s real estate investment, and it is difficult to tell whether conditions of the real estate market will stop deteriorating anytime soon, the ministry said.
If economic conditions show little improvement in the coming months, more areas will see land price falls by the start of next year as the value of real estate reflects future demand, said Shigeo Hirayama, director of a private think tank Urban Research Institute.
“Standard land prices are determined based not so much on actual prices at which transactions were made, but more on expectations for a deterioration in profitability resulting from lowering of rents and other factors,” Hirayama added.
The average price of commercial land fell for the first time in five years, slipping 0.3 percent, while that of residential land dropped 0.7 percent.
In Japan’s three largest metropolitan areas — Tokyo, Osaka and Nagoya — the average price of residential land fell 0.3 percent, declining for the first time in seven years, and that of commercial land rose 0.7 percent.
In areas outside the three metropolitan areas, the average price of commercial-use land was down 0.6 percent and that of residential land was down 0.9 percent.
Among the surveyed sites, the island city of Miyakojima, Okinawa Prefecture, recorded the highest land price rise for both commercial and residential properties of 38.9 percent and 37.3 percent, respectively, boosted by resort hotel development.
The steepest fall in commercial land prices was logged in the city of Takayama, Gifu Prefecture, known for its hot spring resorts, where prices dropped 9.3 percent due to a plunge in the number of tourists.
Tokyo’s Hino saw the sharpest residential land price drop of 18.4 percent, continuing to fall after the Tokyo Metropolitan Government designated parts of the city as natural disaster-prone areas.
Land where the Meidi-ya Ginza commercial building is located in Tokyo’s Ginza shopping district fetched the highest price per square meter for the 15th consecutive year of ¥41 million, down ¥2.2 million from 2019.