Japanese Property Market Quarterly Review,Second Quarter 2016-While Housing Starts Robust, Office and Retail Rents Peak Out-

Kazumasa Takeuchi

3.Housing Market

Housing starts have been increasing in 2016 (Chart-5) as land owners build flats to save on inheritance taxes. Housing starts did not shrink in June even after the decision to reschedule the next consumption tax rate hike, suggesting that the strong housing starts in 2016 had not been mainly attributed to the rush demand before the tax rate hike.

However, the number of new condominium units sold in the Tokyo metropolitan area has been stagnant (Chart-6), shrinking by 19.8% y-o-y in the first half, posting the lowest number in 24 years. It seems rising prices have brought low close rates and high inventories (Chart-7). However, the luxury category has still sold well with high close rates.

Chart-5 Housing Starts/Chart-6 New Condominium Units Sold in the Tokyo Metropolitan Area/Chart-7 New Condominium Units Inventory and Close Rates in the Tokyo Metropolitan Area

4.Land Prices

According to “Rosenka” published by National Tax Authority on July 1, the average national land price rose for the first time in eight years by 0.2% y-o-y. 14 prefectures out of 47 posted land price appreciations topped by Osaka appreciating by 22.1% y-o-y and followed by Tokyo, Nagoya, Sapporo, Sendai, Kanazawa, Hiroshima and Fukuoka, each appreciating by more than 10% y-o-y.

According to Nomura Real Estate Urban-net, residential land prices in the Tokyo metropolitan area rose for the eleventh consecutive quarter since January 2014 (Chart-8). Commercial land prices in the center of Tokyo appreciated significantly such as for Kita Aoyama, Shibuya and Ginza, growing by 60.0%, 39.5% and 15.9% y-o-y respectively (Chart-9).

Chart-8 Tokyo Residential Land Prices/Chart-9 Tokyo Commercial Land Prices