Land Prices in Japan increase for fourth year in a row

Land prices across Japan increased by 2.7% on average as of January this year compared to last year, marking the fourth consecutive year of growth, NHK reports. The rate of increase has accelerated from the previous year, with particularly strong growth in central Tokyo and Osaka, as well as in resort areas popular among foreign buyers seeking second homes.

Experts note that "the gradual economic recovery and influx of money and people from overseas are having a major impact. These effects are spreading nationwide, beyond just the three major metropolitan areas and regional core cities."

National Land Price Trends

The Ministry of Land, Infrastructure, Transport and Tourism announced on March 18th the results of the Land Price Public Notice, which evaluated land prices at 26,000 locations nationwide as of January 1st.

The national average land price, including both residential and commercial areas, rose by 2.7%, which is 0.4 points higher than last year's increase. Residential areas nationwide saw a 2.1% increase, marking the fourth consecutive annual rise. The three major metropolitan areas experienced a stronger 3.3% increase, while regional areas rose by 1.0%.

Commercial areas showed even more robust growth, with the national average rising by 3.9% for the fourth consecutive year. The three major metropolitan areas saw commercial land prices surge by 7.1%, and regional areas increased by 1.6%. In major cities, lower office vacancy rates and higher rents have pushed up land prices, while tourist destinations have seen active purchases of land for stores and hotels.

Areas affected by the Noto Peninsula earthquake in January 2024 have experienced significant drops in land prices, with many of these locations showing the largest declines nationwide.

Tokyo Metropolitan Area Shows Strong Growth

Land prices in the Tokyo metropolitan area (Tokyo, Kanagawa, Saitama, Chiba, and parts of Ibaraki) increased by an average of 5.2%, marking the fourth consecutive year of growth. The rate of increase was 1.2 points higher than last year.

Residential areas in this region rose by 4.2% on average, with many central areas seeing increases exceeding 10%. However, some suburban areas experienced slower growth due to rising construction costs. Commercial areas surged by 8.2% on average, with land near Shibuya Station seeing a remarkable 32.7% increase. Rising office rents and urban redevelopment expectations contributed significantly to these price increases.

Highest-Priced Land in Japan

According to NHK's report, the highest residential land price in Japan for the eighth consecutive year was in Akasaka 1-chome, Minato Ward, Tokyo, at ¥5.9 million per square meter, up 10.3% from last year. The most expensive commercial land was in Ginza 4-chome, Chuo Ward, Tokyo, priced at ¥60.5 million per square meter, an 8.6% increase and the highest for 19 consecutive years. The top industrial land price was in Tokai 2-chome, Ota-ku, Tokyo, at ¥823,000 per square meter, up 8.0% and leading for 13 consecutive years.

Areas with Highest Growth Rates

Tourist destinations and semiconductor factory construction sites showed particularly strong price increases. In residential areas, Kitanominecho in Furano City, Hokkaido led with a 31.3% increase, followed by locations in Hakuba Village, Nagano Prefecture and Miyakojima City, Okinawa Prefecture, all popular tourist destinations.

For commercial areas, Saiwai-cho in Chitose City, Hokkaido saw the highest increase at 48.8%, driven by Rapidus's semiconductor factory construction. Other significant increases occurred in Shibuya Ward and Asakusa in Tokyo, as well as in Takayama City, Gifu Prefecture. The industrial area with the highest growth was in Ozu Town, Kumamoto Prefecture, influenced by TSMC's semiconductor factory in the neighboring town.

Impact of Noto Peninsula Earthquake

Areas affected by last January's earthquake showed significant declines. All ten locations with the largest residential land price declines nationwide were in disaster-affected areas of Ishikawa Prefecture, with Hōji-cho in Wajima City experiencing the steepest drop at 14.5%. Similarly, seven of the ten locations with the largest commercial land price declines were in Ishikawa Prefecture, led by Iida-cho in Suzu City at 16.8%.

Expert Analysis and Market Response

According to Takahashi Masayuki, senior principal researcher at Tokyo Kantei real estate research company, commercial areas are driving the overall increase, with return-to-office trends boosting demand for quality workspaces. Rising tourism is increasing hotel occupancy rates and driving new development. Housing demand remains solid amid continuing low interest rates, with urban condominiums particularly popular among high-income households and investors.

The market is responding with varied approaches. Some developers are increasingly targeting households with annual incomes of ¥10-20 million, offering premium materials and advanced features. Others are reducing unit sizes to maintain affordability while implementing space-efficient designs and cost-saving measures.

According to the Real Estate Economic Institute, new apartment prices in the Tokyo metropolitan area have risen 58% since 2013, while the average floor area has decreased by more than 6%. Despite these challenges, Takahashi expects the upward trend in land prices to continue in the short term, though he cautions about potential risks from major U.S. policy changes affecting global markets and continued construction cost increases slowing transactions.