Japan Land Values Rise Beyond Big Cities

BY Realty Plus

Japan's rising real estate values are spilling over its three major metropolitan areas -- Tokyo, Osaka and Nagoya -- where the upturn began, according to a survey by released by the land ministry, as foreign money continues to pour into the market.

The outlying areas seeing price rises benefit from three factors -- foreign tourism, industrial investment in areas such as semiconductors and redevelopment projects.

"Japan is one of the few markets among advanced nations where one can expect a return on real estate investments," said Yuto Ohigashi, senior director overseeing research at Jones Lang LaSalle (JLL).

There was 2.14 trillion-yen ($14.5 billion) worth of property investment in Japan during the first half of the year, according to real estate servicer JLL, up 52% from a year earlier. This year to date, international investors have purchased 513 billion-yen worth of real estate, which is 60% of the total throughout the whole of 2022.

The city of Takayama is nestled deep in the mountains of central Japan and boasts a well-preserved old town section. It is also seeing a resurgence in real estate values.

The Gifu prefecture city saw commercial land values rise 2.4% this year after dipping by the same percentage last year. Land prices in the city's three main tourist sites climbed, with one place surging by nearly 10%.

A rise in tourist traffic is drawing investment into Takayama. The luxury hotel Mercure Hida Takayama opened its doors in December last year. Hoshino Resorts will open a hot springs inn next year.

Takayama is not the only place outside the big metro areas experiencing a real estate price revival. Prices have risen this year in 44.7% of nationwide sites that are in use and tracked by the government, double the percentage of 2020 when the pandemic stifled values, according to land ministry data released.

"The recovery across the board for tourist areas will continue," thanks to the strong demand for hotels, said Ikuo Koike, a real estate appraiser.

Industrial investment in areas such as semiconductors is also driving up prices outside metropolitan areas. One example is the Hokkaido city of Chitose.

"Compared to a year ago, the number of properties on the housing market has fallen by half," said a representative at the Chitose branch of Joguchi Atom, a major local real estate broker. Japan's national chipmaking champion Rapidus decided in February to build a plant in the city, which spurred demand for more housing as building contractors rush in.

Sites in Chitose took the top three residential spots nationwide in percentage increases in value. The biggest gainer is a site near the city's main rail station, which jumped by more than 30% over a year.

Commercial real estate in Chitose ranks second, third and fourth in terms of price increases, due to demand for office space and the anticipated long-term population growth.

In Kikuyo, a town in Kumamoto prefecture in southwestern Japan, land prices are climbing due to the factory being built by Taiwan Semiconductor Manufacturing Co., the world's largest chip foundry. The values of housing and commercial plots have jumped by 20%-30%, and the arrival of companies involved in the project have left less land available for the factory.

Infrastructure and redevelopment projects have pushed land prices up as well. The city of Fukuoka has seen commercial plots gain 11.2% in value. Two major redevelopment projects are underway after zoning regulations were relaxed.

The three major metropolitan areas are still seeing big gains. Land values rose in 80.8% of the tracked sites this year, compared to 33.5% in 2020. Residential plots in the three urban areas increased 2.2% this year from 0.9% in 2019.

In the Tokyo area, the average price for a new condo unit rose to 99.4 million yen in July, according to the Real Estate Economic Institute in Tokyo, marking an all-time high. The primary focus going forward will be on funds coming from overseas looking to take advantage of Japan's low interest rates and the weak yen, and it is not clear how long Japan's low-interest rate environment will last amid global rate hikes.

Tags : Japan real estate values metropolitan areas Tokyo Osaka Nagoya survey foreign money prices foreign tourism industrial investment redevelopment projects Yuto Ohigashi senior director overseeing research Jones Lang LaSalle (JLL)