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Economy

Urban, suburban land prices continue to diverge

Nakagawa Station of the Yokohama Municipal Subway in Tsuzuki Ward: The rebound of land prices in the suburbs of major cities is slowing.

TOKYO -- Commercial land prices in Japan have stopped falling for the first time in seven years, according to government data, but with the price of land for all purposes falling 0.3% nationwide, a solid recovery is still in the offing.

     One problem is the increasing gap between urban property markets and those in the rest of the country.

     In Japan's three major metropolitan areas -- Tokyo, Osaka and Nagoya -- average commercial as well as residential land prices have risen for two straight years, according data released by the land ministry last week. Elsewhere, however, particularly in areas struggling to slow their population decline, the gains are minimal or nonexistent.

Tourism boost

Hotels in Japan are a good buy in light of the increasing number of tourists from overseas, according to a senior official at a foreign investment fund.

     A British research company reported an 8% rise in average yen-based room prices at major hotels in Japan in 2014 from the previous year.

     The investment value of hotels in Japan will likely rise further, as the number of visitors from abroad is expected to reach an all-time high of 15 million in 2015.

     Fortress Investment Group of the U.S. has purchased 70 properties in Japan over the past five years, including Rihga Royal Hotel Kyoto in February. Investment remains brisk in the Tokyo, Osaka and Nagoya metropolitan areas, despite the rises in land prices there.

     The country as a whole saw average residential land prices drop for the seventh straight year. In the main metropolitan areas, however, they logged a 0.4% gain. All 550 housing units in a 31-story condominium released last summer by Mitsui Fudosan and other companies in the bay area of Tokyo's Koto Ward found buyers within eight months.

     The number of households in Japan has gradually risen to more than 50 million due to an increase in the number of single-person households made up of young people or the elderly living separately from their children.

     The flow of people into urban centers is increasing, with Tokyo's net move-ins rising to more than 70,000 in 2014, according to data on population migration between prefectures, compiled by the Ministry of Internal Affairs and Communications.

     While land prices outside of major urban centers declined for the 23rd year in a row in 2015, some smaller cities are starting to see a rebound. Toyama's average residential land prices rose for the first time in 22 years, reflecting measures adopted by the municipal government to make the city more accessible to elderly residents, such as the construction of a new tramcar system.

     Toyama is known as a pioneer in creating "compact cities," in which urban functions are concentrated in central areas. With the Toyama government subsidizing home purchases in the heart of the city, the number of residents there increased to 135,000 in fiscal 2013 from 118,000 in fiscal 2005.

Not there yet

But land prices are still on their way to recovery. The average price of land for all purposes continued to fall, dipping 0.3% in 2015. Nationwide housing starts, furthermore, decreased 9% in 2014 from the previous year, due partly to a hike in the consumption tax in April that year.

     And even in the major metropolitan areas, suburban property prices remain weak.

     Although the average price of used condominiums in four central wards in Yokohama, Kanagawa Prefecture, rose 3.4% in February from a year earlier, the number of deals decreased in suburban areas, property market research company Tokyo Kantei said.

     Residential land prices climbed more than 3% on average in the heart of Tokyo, but declined in the suburban city of Ome, a sign of the increasing polarization between urban and nonurban markets.

     This unevenness is likely to persist. Takashi Ishizawa, chief real estate analyst at Mizuho Securities said, "Land prices have yet to rebound on a broad front, and the concentration of demand in [big] cities will continue for some time."

(Nikkei)

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