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Carefully determine changing demand for real estate as average prices fall

Posted by: | Posted on: September 30, 2020


The following editorial appeared in Wednesday’s Japan News-Yomiuri:

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Land prices in Japan, which had been on an upward trend, have begun to fall due to the spread of the novel coronavirus. The government and related industries need to closely watch developments in real estate demand.

The national average of land prices for all categories of use as of July 1 this year dropped for the first time in three years, according to a report on benchmark land values released by the Land, Infrastructure, Transport and Tourism Ministry.


By category of use, the national average of land prices for commercial areas, which are susceptible to economic fluctuation, dropped for the first time in five years. Commercial land prices in regional areas, which rose for the first time in 28 years last year, dropped again. The national average of land prices for residential areas further increased the range of reductions.



While a drop in land prices has the merit of making it easier to buy a home, it also deals a heavy blow to the entire economy.

Under such circumstances, the reduction in the value of assets has a psychologically negative impact on businesses and households, thereby resulting in adverse effects on investment and private consumption. There is a danger of the nation plunging into asset deflation that deprives the economy of its vitality. It is desirable that land prices shift stably.


What is worrisome is that structural changes are occurring mainly in the demand for commercial land.

Land prices have fallen sharply in areas where the number of foreign visitors to Japan had increased and transactions for hotels and commercial facilities had been brisk. In addition to local tourist spots, falling land prices have spread to downtown areas such as Ginza and Shinjuku in Tokyo, and around Dotonbori in Osaka. The number of foreign visitors to Japan is unlikely to increase for the time being.


Demand for corporate offices has also begun to decline, with the vacancy rate in central Tokyo turning upward. Rents are said to be on a downward trend.

This is probably because the expansion of teleworking has prompted companies to scale down their offices. Fujitsu Ltd. intends to halve its domestic office space. Such a trend is expected to continue even after the coronavirus is brought under control.


The land ministry said that it currently cannot confirm to what extent the decline in the demand for offices has influenced falling land prices. However, the future of land prices is unpredictable. If the fall in land prices accelerates from now on, the government should consider shoring up prices such as through economic stimulus measures.

Stock prices remain firm, and the Bank of Japan’s quantitative easing has not changed the situation in which funds tend to flow into real estate. It is important to carefully determine the influence of the coronavirus.

Changes in work styles, such as the establishment of teleworking, are good opportunities for regional areas where land prices have been sluggish. This is because there is a possibility that the land near stations in urban areas could become less attractive, and comparatively cheaper real estate in suburban or regional areas could become more popular.

It is vital for local governments to improve working environments such as by expanding the information technology infrastructure or providing support for housing suitable for teleworking. In order to rectify the overconcentration of the population and government functions in Tokyo, the central government is also urged to support efforts by local governments and companies, thereby leading them to vitalize regional economies.

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