In Japan, real estate prices have been steadily falling for years, but according to Japan’s Ministry of Land, Infrastructure, Transport and Tourism, this year’s drop has been the smallest in the last 21 years.
The nationwide average price decreased by 2.7 percent as of July 1, compared to a 3.4 percent decline same time last year.
The drop in land values could potentially decrease even further, due to demand before a planned consumption tax increase, Japan’s first since 1997. Low interest rates and tax incentives are also supporting the housing demand.
Commercial land prices have slowed their drop, from 4 percent last year to 3.1 percent in 2012, whereas residential values have slowed to 2.5 percent from 3.2 percent in 2011.
A report from Sumitomo Mitsui Trust Research Institute Co., a Tokyo-based consulting company, indicates that property acquisitions by Japan’s real estate investment trusts (j-REITs) have supported prices. Assets purchased by JREITs have expanded at the fastest pace in four years, rising to 8.8 percent and 8.7 trillion Yen as of June 30 from 2011.
On the other hand, Moody’s Japan K.K’s report indicates that JREITs commercial mortgage backed securities deals are due to remain weak in the medium term, due to cash flows from office buildings, which make up the majority of their portfolio.
According to the report, prices in the three major metropolitan areas of Japan, Tokyo, Osaka and Nagoya, declined to 1 percent, from a drop of 1.9 percent last year and property prices in rural regions slid 3.4 percent from a 4 percent slump a year earlier.
Still, the most expensive commercial property is in Tokyo’s Ginza shopping district, where land has sold for up to 19.7 million yen per square meter.
In the area where the Imperial Palace is located, Tokyo’s Chiyoda ward, the most expensive residential land can be found at 2.78 million Yen per square meter.