Japan’s land prices rise at fastest pace since 1991

By Thomson Reuters Mar 26, 2024 | 2:52 AM

TOKYO (Reuters) – Japan’s land prices rose at the fastest pace in 33 years in 2023 and returned to the level seen before the coronavirus crisis, a government survey showed, another sign of an improving economic outlook as the nation plots a path out of years of stagnation.

The rise was helped by the economic recovery and return of foreign visitors after the pandemic, the survey released on Tuesday found.

Average nationwide land prices rose 2.3% in the year through January 1, the strongest pace of growth since a 11.3% gain in 1991 when land prices started weakening with the bursting of the late 1980s asset bubble.

“The upward trend of land prices has strengthened,” said an official at the land ministry. “Movement towards the end of deflation is spreading”.

The positive land price growth joins other key economic conditions – surging stocks, robust wage growth and annual consumer inflation staying above 2% for well over a year – that led the Bank of Japan to end negative rates last week in a landmark shift away from decades of monetary stimulus.

Residential land prices rose 2.0% for the year, also the fastest pace since 1991, following a 1.4% gain in the previous year.

Housing demand for urban areas and places with good transportation continued to be solid, while foreign demand for vacation home and condominium in resort areas such as northern Furano city in Hokkaido helped boost prices.

Commercial land prices advanced 3.1%, up for the third straight year, and the same rate of rise seen in 2020, the survey showed.

Recovery from the pandemic and redevelopment projects as well as brisk inbound tourism helped demand.

Construction of semiconductor plants in Kikuyo town, Kumamoto prefecture and Chitose city in Hokkaido attracted demand for offices and housings, which led to strong gains in land prices around the areas.

Taiwan’s chipmaker TSMC formally opened its first Japanese plant in Kikuyo last month, while Rapidus, government-backed Japanese chip foundry venture, is building a plant in Chitose.

Land prices in industrial areas grew 4.2%, rising for an eight straight year and at the quickest pace of growth since 1991, led by demand for large logistics facilities due to the expansion of the e-commerce market.

Land prices in Japan’s three major metropolitan areas surrounding Tokyo, Osaka and Nagoya rose 3.5%, the fastest since 2008, helped by inbond tourism.

Average land prices in the four major regional cities of Sapporo, Sendai, Hiroshima and Fukuoka grew 7.7%, up for the 11th straight year, partly buoyed by development projects.

(Reporting by Kaori Kaneko; Editing by Shri Navaratnam)