Japan land prices  rise fastest in 15 years

Easy money, people returning to the office and foreign investment fuel gains

Japan land prices gained the most in 15 years as a loose monetary policy and the lifting of COVID restrictions fueled demand for offices, condominiums and hotels.

As of Jan. 1, prices were 1.6% higher than a year earlier, a second straight annual gain, data from the Ministry of Land, Infrastructure and Transport showed on Wednesday. A rise of 0.6% was recorded as of the previous New Year's Day. Prices marked as of the beginning of January 2021 had dropped 0.5% due to the pandemic.

While prices rose the most since the 1.7% recorded in 2008, the gains are not uniform as provincial areas still suffer from depopulation. Some 58% of 26,000 locations saw increases, up from 43.6% in 2022.

The biggest gains were in commercial areas, which saw an average increase of 1.8%. In Tokyo's central business districts, Chiyoda and Chuo wards recorded increases of 2.1%, while Minato Ward gained 2.8%.

The availability of easy money in Japan helped prices rise, with analysts saying Japanese real estate investments can produce stable returns. Foreign investors are believed to have contributed to the increase, having accounted for 34% of purchases by value in 2020, according to real estate company JLL.

But uncertainty is hanging over the market, stirred up by global interest rate hikes and a global economic slowdown. According to JLL, global real estate investment fell 19% to $1.029 trillion last year.

"As the real estate market slows overseas, it could have a spillover effect on the Japanese market," said Masaaki Sakamoto, research head at the Sumitomo Mitsui Trust Research Institute.

Commercial land prices in the metropolitan areas of Tokyo, Osaka and Nagoya increased 2.9%, up from 0.7%, indicating more people are returning to the office after working from home during the pandemic.

Gains were also strong in popular tourist spots such as Asakusa in Tokyo and areas near Kiyomizu Temple in Kyoto. Prices in residential areas rose 1.4%.

Notable gains include a 20.9% rise in the city of Kisarazu, Chiba Prefecture, east of Tokyo, and an average 8.5% increase across the four major provincial cities of Sapporo, Sendai, Hiroshima and Fukuoka. Real estate prices in one area near Sapporo appreciated 30% following the opening of a baseball stadium.

Outside of metropolitan areas and the four major regional cities, residential land prices managed to inch up 0.4%, the first increase in 28 years.