Some critics in the industry are predicting the price of condominiums in Tokyo shall drop soon simply because they are too expensive for people to buy.
According to Nikkei in December 2017, the average price of a newly built condo in the capital region — Tokyo and the surrounding prefectures of Kanagawa, Saitama
and Chiba — rose 7.6% in 2017 to 59.08 million yen ($533,000).That was higher than the average in 1989 and 1991 and the second-highest level ever,
trailing only the 1990 record by 2.15 million yen.
Are condominiums really too expensive ? Are those critics are right ?
We need a crystal ball to predict the future
but today I am going to discuss the reason why the price of condominiums may go down.
Personally though, I am still mildly bullish about the market right now due the global aspect (see below UBS report)
and the healthy growth of the secondhand condominium market.
It is always to good to listen to the people with different opinions.
Let’s listen to what critics have to say.
We saw the condominiums developers go bankrupt one after another in the recession after the global financial crisis in 2008.
Nonetheless, the current price of newly built condominiums in greater Tokyo area has risen up sharply over several years and they are becoming more and more unaffordable for average salaried workers.
In the latest Tokyo kantei report in 2017, the average price of new condominiums are about 8-10 times higher than average annual income of the skilled workers in greater Tokyo area.(vs. 14 times in London)
London house price
The reason for raising is not because real demand is strong because everyone wants to buy them.
Read more
Special Topics
How is Japan population evolving in terms of the real estate investment ? – Intra migration dynamics-
Overall, Japan looks to be shrinking but big cities are expanding.
How does it have an implication on the real estate in Japan.
I have been hearing a question repeatedly from a number of my
foreign friends (and Japanese friends, too), that is “Why do you
want to invest in the property in a country where the
population is decreasing ?”
It is very true that overall Japan is shrinking but when it comes to the real
estate investment such naive macro view could mislead your decision.
The population growth is one of the biggest factors in the property
investment in deed and a growing population should give you the opportunity
to raise rents over time and also should enhance values of your property.
However you need to see the numbers in depth.
The Japanese Government recently announced the official intra
population movement report(statistics of intra-prefecture migration)
in 2017.
Based on the investors view, here are your takeaways from the announcement.
1. Tokyo area (greater Tokyo) won’t stop growing
According to the report, the greater Tokyo area (Tokyo, Saitama, Chiba, Kanagawa)
was in “net surplus” in which the number of the net inflows stands at 117,779.
Net surplus (net increase of the population) in the greater Tokyo area has posted
for 22 consecutive years, net surplus number (growth) has also
increased since 2009.
Looking at the each number of domestic migration by prefecture in 2017,
only seven prefectures of Tokyo, Chiba, Saitama, Kanagawa, Fukuoka, Aichi
and Osaka are in net surplus. The largest number of net inflow is shown in Tokyo
as prefecture (net 75,598 surplus), followed by 16,303 in Chiba and 10,423 in Saitama.
You can find the stark contrast among the prefectures in the following chart
which was published by Statistics Bureau of ministry of the internal affairs
and communications on January 29, 2018. Read more