Tokyo’s skyrocketing real estate prices overtake 1990 bubble-era record
The price of the new condos in the Japanese capital hit a record 62.6 million yen (US$ 550,000), driven by the demand for luxury housing, but the flip side is rural depopulation and growing inequalities.
Tokyo (AsiaNews) – Real estate prices in Tokyo have never been so high since asset bubble of the 1990s.
According to the Real Estate Economic Institute, the average price of a new condo in the Tokyo area reached 62.6 million yen (around US$ 550,000), up from the previous record of 61.2 million established in 1990.
With about 37 million people, the Greater Tokyo Area (the capital, plus neighbouring prefectures like Kanagawa, Chiba and Saitama) is the most populous region in the world.
The new record reflects a ten-year trend. Starting in 2012, the price of condos began to rise after two decades of substantial stagnation.
The year 2021 saw an increase of 2.9 per cent over 2020, with a robust +7.5% in Tokyo prefecture alone.
At least three factors are behind this trend, starting with the low interest rate policy launched a decade ago by the government of then Prime Minister Shinzo Abe to support demand in the real estate market.
A second element is the pandemic and the transition to remote work. As a result, many Japanese experienced the need for larger homes for their private and professional lives.
On top of these two factors is the relative scarcity of land and labour, which according to some analysts has especially impacted the Tokyo real estate market.
Rising prices for new condos is also reflected in the resale condo market. In 2021, 39,812 pre-owned condos were sold in the Tokyo area, a record number.
Their price, however, is getting closer and closer to that of newly built units. Last year the average price of pre-owned condos in the capital area was 41.66 million yen (US$ 360,000), up by 11.6 per cent, this according to Tokyo Kantei, a real estate think tank.
However, the data indicate two growing imbalances. The first is land. Whilst its value in Tokyo is rising, government data show that 38 of the country’s 47 prefectures saw land prices drop.
Outside Japan’s three major metropolitan areas, the decline averaged -0.7 per cent.
The second imbalance is social. The upward trend in prices is driven mainly by the demand for luxury homes in central Tokyo, in areas like Chiyoda and Minato.
According to the Real Estate Economic Institute, new condos priced above 100 million yen (US$ 865,000) represented 8.6 per cent of all those sold in 2021, the highest percentage on record.
This is in addition to a tax relief system that allows a portion of the mortgage to be deducted from taxes. The latter was introduced decades ago to help Japanese families buy a home.
But today, this mechanism helps more middle- and upper-class families invest in real estate whilst denying many low-income families the same benefits.
The government is well aware of the situation, but the real estate sector has substantial political clout.
Meanwhile, rural depopulation, growing inequalities, and low birth rates are issues that remain inextricably linked to how the government manages the real estate market.
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15/09/2010
