The MLIT released the 2008 kijunchika or `land price survey` figures on Friday.
The kijunchika land price survey is done by the prefectural governments by taking data from transactions and appraisals over the year and evaluating the land value of some 23,749 representative tranches of land across the country as of July 1st each year. The tranches are divided by usage: residential, commercial, and industrial. The gathered information is analysed and numbers published by the MLIT in late September.
These kijunchika figures along with the chikakoji, `public notice of land prices` which is a similar study but done by the MLIT for land values as of January 1 of each year (published late March), are the government`s official view on how land values are moving. These figures are different from tax assessment values but they are used by the local governments in determining those tax values in some part.
The official government land price figures are an important indicator but also need to be taken with a grain of salt as they do not represent specific transactions but rather a trend and it can be biased to the conservative in many cases. However, as there is no public record of actual transactions available in Japan, these figures are a valuable tool to understand the trend. The MLIT land price English website is here, but the studies are only published in Japanese and shown on the Japanese website.
General observations from this year`s figures are that the strong growth of main urban areas seen in 2007 has slowed and most regional areas outside of Greater Tokyo, Osaka, and Nagoya, Sendai and other main cities, values continue to drop.
In Tokyo, the most central wards saw double digit and up to mid-20% growth in 2007 but this fell to low single digit growth for 2008. The average growth for Greater Tokyo was 1.6% resi / 4.0% commercial and the numbers for each prefecture in Greater Tokyo (Saitama, Chiba, Tokyo, Kanagawa) was positive.
The strongest growth in Japan lying in Kanagawa prefecture, south-east from central Tokyo where Yokohama saw residential price growth at 2.6% range and commercial at 4.1%, with prices in the most central part of Yokohama City at 8-10% for residential and 10-15% for commercial.
Tokyo Prefecture itself moved from 9.9% resi / 17.2% commercial growth in 2007 down to 1.9% / 4.6% growth this year. Osaka prefecture was positive at 0.8% resi / 4.4% commercial, down from 2.8% / 10.4% last year while the surrounding Kyoto and Kobe and Shiga were flat. The Nagoya area of Aichi Prefecture was also positive at 1.7% resi / 1.8% commercial, down from 2.5% / 7.2% last year. The only other growth for an entire prefecture was seen in commercial land in Miyagi Prefecture, where Sendai City is located. Otherwise, the average prices for all other prefectures were down but no more than -4.6% for residential (Kochi Pref, with Fukui and Tokushima close at -4.4%) and -5.9% for commercial (Kochi Pref, Akita Pref, with other north-eastern prefectures Aomori, Iwate, as well as Fukui close).
The top 10 performing locations in Japan for the following sectors were:
Residential: Commercial: Industrial:
Niseko, Hokkaido at 40.9% Sendai City, Aoba Ward at 22.3% Chiba, Funabashi City at 26.4%
Sendai City, Aoba at 16.2% Sendai City, Aoba at 21.6% Chiba, Ichikawa City at 25.0%
Sendai City, Aoba at 15.7% Tokyo, Shinjuku at 20.2% Kawasaki, Kawasaki at 21%
Nagano, Karuizawa at 14.5% Nagoya City, Nakamura at 19.8% Kawasaki, Kawasaki at 10.6%
Nagano, Karuizawa at 12% Sendai City, Aoba at 18.7% Saitama, Sakado City at 8.5%
Nagano, Karuizawa at 10.8% Tokyo, Ginza at 18.6% Osaka, Sakai City, Nishi at 8.3%
Aichi, Karitani at 10.6% Saitama, Kawaguchi at 18.4% Shiga Pref, Kurito City at 8.1%
Aichi, Karitani at 10.5% Nagoya City, Nakamura at 18.1% Saitama Pref, Higi-gun at 7.9%
Kobe, Ashiya at 9.8% Sendai City, Miyagino at 18.1% Saitama Pref, Irima City at 7.7%
Nagoya City, Midori at 9.8% Osaka City, Umeda at 18.0% Kanagawa, Yokohama, Totsuka at 7.3%
Let us attempt to interpret this at least in general terms. In the residential sector, the continued strength of Niseko developing into an international destination has come through but to put this in perspective the base land value is still relatively low at 31,000 yen/sq.m. Compare this to the other mountain resort location on the strong growth, Karuizawa, where the official prices ranged from 20,500 to 95,000 / sq.m.
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While residential prices in the main cities Tokyo and Osaka cooled a bit, last year`s wave to secondary cities is seen as continuing to flow at least through the 1st half of 2008 in the Sendai, Kobe, and Nagoya figures. The Karitani growth is an anomaly due to special measures the city has done to successfully revive the local economy and increase the population.
In the commercial sector, the same phenomenon is seen as the strongest growth areas in central Tokyo slowed down first while the wave out to Sendai and Nagoya is still taking place. Within Tokyo and Osaka, the strongest retail areas of Shinjuku, Ginza, and Umeda seem to still be holding up as of July 1 but we would tend to believe the upward trend has stopped since. A decline in Shibuya in favor of Shinjuku during the 1st half of this year seems to demonstrate that the Shibuya/Aoyama market saw too sharp of a growth during 2006 and 2007 and cooled off first.
In the industrial sector, most of of these locations are growth due purely to the redevelopment of large sites for new distribution and logistics centers. If there is no land amalgamation and/or redevelopment, industrial sites are not going to see any growth.
The worst performers ranged from -13 to -18% and were concentrated in the far corners of Kochi, Akita, Hiroshima, Niigata, and Kumamoto Prefectures.
On the whole, growth has slowed and the most popular urban areas are those that have been affected the least. We expect that over the coming 12-18 months this general trend will maintain. Increasing distressed situations will drive average prices down but we stress that these are merely distressed situations due to structural and liquidity issues and not the fundamentals of the Japan real estate market, which continue to be robust in the urban core. The buying opportunities in Tokyo are becoming abundant and on the macro view we would maintain that the market is more attractive than most other developed markets in the world today.