Land Price trend & prospects in Japan

In Japan there are two national land price surveys:

1 Chika koji survey as of Jan 1^st, conducted by MLIT,

2 Chika chosa survey as of July 1st, conducted by each prefecture.

The result of Chika chosa survey as of July 1^st 2020 has just been announced.

The notable features and future prospects from this survey are as follows.

1 Prices will decrease more

The survey has been conducted by collecting and analyzing actual comparables recorded last year and early this year. During the period, the market had still been booming and buyers were very much bullish. However, even though surveyors analyzed those data, the result recorded slight decrease, consequently, the market had presumably already been saturated and about to turn into the declining stage. Since this February, some retail tenants have asked the rent reduction/ exemption period due to COVID-19 pandemic, and therefore, the actual cash flow from the property will be much decrease in this year. The result will be reflected into actual land value in future and therefore, in next survey, we will see more value decrease.

2 Secondary residential would be more preferred

The Chikachosa survey said that due to the increasing need for the remote work, more and more people prefer staying at their home or rather they prefer moving to convenient location.

Therefore what we can assume is a sort of sprawling will be seen in greater city centre area. The residential properties in city centre has remained high in their values, and younger generations, say thirties or forties, may prefer settling down in balanced area where the both of living environment and working convenience can be pursued. This may be seen as sprawling phenmina of large cities.

3 Logistic remain stable

Say, for past decades, due to the e-commerce, internet accessibility improvements, and improvements in logistic services, the demand for warehouse has been strong. This will be accelerated further, and more and more logistic area will be seen in greater city central as well as surroundings of transportation hubs.

4 Retail will see a bit more decrease

Now a lot of negotiations have been on going and some retailer will be screened out of the competition. From retail owner’s view point, at this moment, it seems to be hard to decide, what kind of retail service will fit in the next era. Therefore, we may see more value decrease in retail properties due to decreased rental income.

5 Resort will decline harder

Okinawa and Hokkaido have recorded value increase however, this has come from bubbled pricing associated with inbound boom in tourism industry. Now, in the next six months, actual demand will be reflected into the price and more and more hotel fire sales will be seen in tourism destinations. Therefore, the price decline will be seen in future in terms of resort facilities. How much and how hard would depend on the finance: how deep the finance has been arranged for hotel operators/ investors and how much tolerant those financial institutions can be.

Further queries or doubts, please email to ytomizuka@abrilsjp.com

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