Japanese House Prices Fall as Economic ... - Real Estate Japan

The Land Institute of Japan released a report on the status of land prices and house prices in Japan. According to the report, prices in the Tokyo and Osaka metropolitan areas remained stable for the year ending August 2012. However, house prices continue to fall. Deflation pulls the value of the yen and lower export volume forces prices down.

While reports of financial recovery in Japan emerged, analysts say that the country is still recovering from the decades of financial turmoil, which was made worse by the 2011 national disasters. ?According to the data from Global Property Guide, the average price of new condominium units in the Tokyo metropolitan area dropped 5.1% year on year to 691,000 per square meter in August 2012. The average prices of existing condo units also dropped 3.3% to 380,000 yen per square meter also in August 2012, the 14th consecutive month of decline. Price of detached houses fell 1.7% to 31,770,00 yen over the same period. In the Osaka metropolitan area, price of new condominium units fell 3.2% to 457,000 yen per square meter while existing condo units fell 1.6% to 239,000 per square meter over the same period.

Despite these numbers, experts say that land prices in Japan remain flexible. Average land price in Tokyo in the same period remain unchanged at 1187,000 per square meter while the average land price in Osaka increased by 1.7% to 117,000 yen per square meter.

The Ministry of Land, Infrastructure, Transportation and Tourism of Japan also added that in the first seven months of the current year, the number of new houses in the country increased year on year by 2.5% because of the reconstruction after the Great Tohoku Earthquake. The report from the Ministry also showed that the number of condos sold in Tokyo increased by 10.6% while detached houses that were sold increased 9.5% during the first eight months of the year compared to the same period the previous year. When it comes to total outstanding real estate loans, The Bank of Japan reported an increase of 1.5% year on year in the second quarter of 2012.

Japan is still recovering from the great asset bubble in the late 1980s. Land prices in Japan increased 200% from 1970-1980 and 238.5% in six major cities and during the 1980s there was a 103% increase nationally and 272.2% increase in six major cities. The 1991 crash contributed to the slow recovery of the country?s economy, which left banks with bad loans of almost 1 trillion USD.

The country?s recovery is still slow moving, also because of the weight of the damages caused by the global financial crisis in 2008 and 2009 and the effects of the 2011 natural disasters. But still, any sign of recovery is better than nothing. Japan?s economy bounced back in 2010, with strong condo sales recorded in Tokyo and dwelling units sold increased 22.5%, an increase that was backed by the enchanted mortgage tax break carried over from 2009, according to the Real Estate Economic Institute. Though land sales declined in 2010, Sales in Osaka were up 0.24% during the year to September 2011 but land sales registrations in Tokyo and in other cities fell down 0.99% and 2.% respectively. Other signs of recovery include increase in housing starts, in the third quarter of 2011 and increase housing investment due to rebuilding efforts. Trade deficit in the country continues to grow, a problem that isn?t going away too soon. Trade deficit from January to November 2011 was above 2 trillion yen.

All in all, the future remains uncertain and there are mixed signals in Japan?s economy. The International Monetary Fund expects that the Japanese economy would rebound as the plans for reconstruction progress. IMF also adds that the economy will grow in 2012 by 2.3% which will be a good thing especially for the housing market. But despite a positive outlook, numbers remain dismal for Japan. In the second quarter of 2012, the economy expanded just 0.2%q-o-q after a 1.3% growth in the previous quarter. Deflation continues to get worse and core consumer prices fell 0.3% in August 2012 from a year earlier, a very sharp contrast on BOJ?s 1% inflation target.

The BOJ said that Japan is in for a great struggle to recover from the slump it?s in. The country faces a critical challenge to overcome deflation and get back on a sustainable growth path with price stability.

Original Article: NuWire InvestorPhoto credits: ?MortgagePro and ?H?ctor Romero via Flickr Creative Commons

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Source: http://www.realestate.co.jp/2012/10/18/japanese-house-prices-fall-as-economic-growth-continues-to-struggle/

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