The year 2023 has witnessed a significant rise in land prices across Japan, marking the second consecutive year of increase, according to government data released on Monday. This surge in land prices adds to the growing signs of economic recovery from the impact of the coronavirus pandemic.
The recovery in land prices for commercial areas has been a driving force behind this upward trend. The data, as of January 1, revealed a positive shift following the government’s easing of COVID-19 measures, including immigration controls. This has instilled hope that businesses will experience a revival fueled by the demand from foreign tourists.
Out of the 47 prefectures in Japan, 25, including major cities like Tokyo and Osaka, recorded higher average land prices compared to the pre-pandemic level of 21 prefectures in 2020, as shown by data from the National Tax Agency.
The annual survey conducted by the agency measures prices per square meter of land facing major roads, which is utilized to calculate inheritance and gift taxes. The data is compiled by the Ministry of Land, Infrastructure, Transport and Tourism and reflects actual land transactions.
Hokkaido emerged as the top-performing prefecture this year, boasting a remarkable 6.8 percent increase in land prices. This surge indicates a growing demand for housing and commercial facilities in and around its capital, Sapporo.
Fukuoka secured the second position with a hike of 4.5 percent, followed closely by Miyagi with 4.4 percent. Tokyo witnessed a rise of 3.2 percent, while Osaka experienced a more modest increase of 1.4 percent.
Conversely, average land prices declined in 20 prefectures, with Wakayama seeing a decrease of 1.2 percent, Fukui 1.0 percent, and Ehime 0.9 percent.
Osamu Nagashima, the head of real estate consulting company Sakurajimusyo Inc., attributed the rising land prices to the surge in condominium and other property prices. With more people working from home post-pandemic and seeking to relocate, combined with low borrowing costs from banks, land prices have been driven upwards.
Nagashima emphasized that if interest rates remain low, the demand for land will continue to surpass supply, resulting in further price increases. However, he cautioned that this recovery trend could be hindered if the overall economy experiences higher building material costs due to inflationary pressures.
The survey also revealed that among the capitals of prefectures, 29 cities witnessed an increase in land prices in prime locations compared to 15 cities in the previous year. Okayama and Sapporo stood out with significant rises of 9.3 percent and 8.4 percent, respectively, buoyed by ongoing redevelopment projects in their respective areas.
For the 38th consecutive year, the most expensive plot in the country remained in front of the Kyukyodo stationery store in Tokyo’s Ginza shopping district. The land was appraised at 42.72 million yen per square meter, representing a 1.1 percent increase from the previous year.
As in previous years, no values were assigned to land in areas designated as evacuation zones in Fukushima Prefecture following the 2011 nuclear disaster, due to the challenges involved in appraising these locations.
In summary, the surge in land prices in Japan signifies a positive trajectory for the country’s post-pandemic recovery. The rise in commercial land prices, along with the demand for housing and ongoing redevelopment projects, has contributed to this upward trend. While low interest rates continue to drive demand, potential challenges such as inflationary pressures on building material costs may impact the recovery. It remains to be seen how this dynamic landscape will evolve in the coming months.