Tokyo land prices rise 17.5%, nationwide 10%

Source : Business Times - 1 Jul 2008

Land prices in Tokyo rose 17.5 per cent last year in the biggest increase by far since Japan’s bubble years, a government survey showed on Tuesday, although rural areas have yet to share in the recovery.

The rise in Tokyo property prices, which was the fourth straight year of increases, followed a 17 per cent rise in 2006, the tax agency said.

Led by the increase in Tokyo, average national land prices rose 10.0 per cent last year after an 8.6 per cent increase in 2006, marking the third straight year of increases, it said.

Property price growth outside of Tokyo was patchy, however.

Land prices in the central Japan city of Nagoya, close to the home of world’s No 1 automaker Toyota Motor Corp rose 10.9 per cent, a bigger increase than 9.1 per cent in 2006.

But in Osaka, western Japan, property prices rose 7.4 per cent, a smaller increase than the previous year’s 8.1 per cent, the tax agency said.

Property prices fell in 28 of Japan’s 47 prefectures last year, the tax agency said.

Land prices in rural areas were flat last year, suggesting that the property boom in Tokyo has yet to spread broadly across the nation even as the economy shows signs of peaking.

Japan’s economic recovery has boosted demand for office buildings and fuelled investment in real estate in big cities, with rapid rises in Tokyo’s retail heart seen by some economists as driven by speculative investment.

But the economy is expected to have contracted in the second quarter of this year on slowing global growth and slack domestic demand.

Analysts say tighter global credit conditions after last year’s US sub-prime mortgage loan crisis could also cool property investment.

Japan’s land prices had dived since the early 1990s after the nation’s asset price bubble burst, leaving a huge amount of bad loans in the banking sector and crippling the economy for a decade.

The National Tax Agency evaluates land prices as of Jan 1 every year to calculate property tax. It is among the several property surveys published by the government. — REUTERS