Inflation persisting in Japan is having a mixed impact on Tokyo's real estate market. As rising prices increase the cost of living, some are postponing the purchase of dwellings, while others are rushing to buy before prices climb further.
Bloomberg reported on the 16th (local time) that, as inflation continues in Japan, real estate market consumers are at a crossroads. According to a survey conducted by Bloomberg Intelligence for two weeks from the end of September, about one-third of 1,000 respondents who plan to purchase dwellings in central Tokyo within the next two years said they would "delay buying," while a similar share said they "plan to move up the purchase schedule." The former cited "rising living costs" as the main reason, while the latter pointed to "concerns about further increases."
In fact, dwelling prices in Tokyo have been rising for years. Limited supply and higher construction costs are driving the increase, and a rise in transactions of high-end apartments in the city center is also analyzed as a factor lifting the average price. According to the Real Estate Economic Institute, in the first half of this year the average pre-sale price of new dwellings in central Tokyo surged 20.4% from a year earlier to 130.6 million yen (about 1.23692 billion won), the highest on record.
These price increases continued even after the Bank of Japan ended its negative interest rate policy last year and implemented two additional rate hikes. Most Japanese home mortgages are floating interest rate products, and low rates as low as the 0.5% range have been maintained until recently.
The problem is that wage growth is not keeping pace with inflation. In August, Japan's consumer prices rose 2.7% from a year earlier, but wage growth was only 1.5%, pushing up perceived inflation. Patrick Wong, an analyst at Bloomberg Intelligence, said, "The gap between prices and wages is eroding households' disposable income," adding, "This gap is reducing the capacity to purchase dwellings."
Japan's land prices are also rising at the fastest pace in 34 years this year. According to the Asahi Shimbun, benchmark land prices announced by the Ministry of Land, Infrastructure, Transport and Tourism as of Jul. 1 rose 1.5% from a year earlier, the highest level since 1991 (3.4%) just before the bubble burst. The result is attributed to advanced semiconductor corporations such as Rapidus building new plants and the inflow of overseas capital.
So-called "global big spenders" are also sweeping up Japanese real estate. In the first half of this year, foreign investment in Japanese real estate reached 1.14 trillion yen (about 10.83 trillion won), a record high, with Chinese buyers in particular snapping up properties, taking advantage of the weak yen and low interest rates. Experts noted that "Japan is pursuing a 'megacity strategy' to attract global corporations and capital to urban centers such as Tokyo, Osaka, and Nagoya," adding, "Foreign investment in real estate will become even more active."