February 3, 2017 2:00 pm JST

Uptick of used apartment prices slowing in Japan

Secondhand market looks ready to peak

Apartment buildings in Tokyo's Chuo Ward.

TOKYO -- Rising prices of used apartments in Japan appear to have outpaced demand from home buyers. The pace of increase is becoming slower, particularly in Tokyo and other urban areas, and the shift is drawing interest from investors in other parts of Asia.

Property brokers are becoming sensitive to judge optimal selling prices of homes.

"An increasing number of potential buyers of secondhand apartments are now in a "wait and see" mood," said Tsuneo Kiuchi from Nomura Real Estate Urban Net, a major Japanese property broker. "We can no longer set bullish prices."

The secondhand apartment market in Japan seems active at a glance. According to Tokyo Kantei, a property evaluator specializing in apartment residences, the selling price of used apartments in Greater Tokyo was on average 34.7 million yen ($306,808) per 70-sq.-meter lot in 2016, up 13.2% from a year earlier. That beats the most recent high in 2008.

Meanwhile, the average price of new apartment units in 2016 fell 0.5% from the year before to 54.9 million yen, marking the first decline in four years, according to Real Estate Economic Institute. The number of units sold during the year also dropped 11.6% on the year, while the success rate of contracts fell below 70%, the threshold between upturn and downturn trends of the market.

Takeshi Ide, a senior researcher at Tokyo Kantei, explained that people have shifted their focus to the secondhand market, rather than the new apartment market where they can find only a limited number of pricey homes. 

Too lofty

But the future of the secondhand market is not exactly bright. Adjustments to excessive expansion of prices have been witnessed across urban cities, especially in Tokyo's 23 wards.

The shift of price trend is more evident in central districts than elsewhere -- a year-on-year increase of secondhand apartment prices in six wards in central Tokyo, including Chiyoda, Chuo, Shinjuku and Shibuya, stood at 2.3% in December -- much slower than the 9.1% growth for all of Greater Tokyo. In other bayside wards in the capital, prices of large apartment units even began declining.

"The government's measures to stimulate the economy [including tax benefits on home loans] boosted apartment transactions, but consumers' keenness to buy homes is somehow diminishing," according to Mitsui Fudosan Realty, another property broker.

With prices of new apartment units becoming relatively reasonable, some people are again considering buying new homes. Lower purchase prices can encourage those who seek to buy and rent a unit as an investment option.

According to Sinyi Realty, a Taiwanese property broker that has operations in Japan, the secondhand market is currently showing higher yields than the one for new units, but many overseas investors prefer to buy new properties with better quality and facilities.

(Nikkei)

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