Tokyo Area Condo Prices Remain Sky-High
Tokyo, Oct. 7 (Jiji Press)--Prices for new condominiums in the Tokyo metropolitan area remain elevated, leaving many units, especially those in central Tokyo, out of reach for the average buyer.
According to Real Estate Economic Institute Co., the average price of new condominiums put up for sale in Tokyo and three neighboring prefectures--Kanagawa, Saitama and Chiba--in the first half of this year reached 76.77 million yen. In central Tokyo's densely populated 23 wards, the average price of new condos stood at 108.55 million yen, marking the second consecutive year that prices have exceeded 100 million yen.
"Even power couples, (who are high-income earners,) cannot afford them," an industry official noted.
New condominium prices in the greater Tokyo area experienced a decline of 13.5 pct in the first half of the year from the same period last year, posting the first drop in three years. The decline was largely driven by a 16.3 pct fall in the 23 wards of Tokyo. But this decline was influenced by the sale of many ultra-expensive properties in the previous year, and the current price levels remain significantly high.
A notable wave of price increases was observed in urban areas surrounding Tokyo. In Chiba Prefecture, the average price rose by 22.3 pct to 58.31 million yen, while Kanagawa Prefecture saw an increase of 7.7 pct to 61.88 million yen, and Saitama Prefecture experienced a rise of 2.8 pct to 51.61 million yen.
In addition to rising land and construction material prices, increased personnel costs stemming from labor shortages at construction sites have contributed to higher condominium prices.
The shortage of workers has also caused delays in construction projects. In the first half of the year, the number of new condos launched in the Tokyo area fell by 13.7 pct to 9,066 units, falling below 10,000 units for the first time in four years. The tight supply is driving up condo prices further as a whole.
Still, condominium supplies are expected to remain robust in the Makuhari and Urayasu areas of Chiba Prefecture, which offer good access to central Tokyo, according to Real Estate Economic Institute. Additionally, condo development is making progress along the Tsukuba Express railway line.
"With Tokyo's 23 wards as the primary battlefield, (major real estate developers) are likely to continue expanding their development activities into surrounding areas for the foreseeable future due to elevated construction costs (in central Tokyo)," Tadashi Matsuda, a senior researcher at the research company, said.
In response to the escalating prices and limited supplies of new condominiums, some real estate and housing companies are intensifying their efforts in rebuilding aging homes and condos, renovating existing properties and developing rental options.
Tokyo-based Tokyu Land Corp. is operating a rental business focused on renovations aimed at young people. Meanwhile, Panasonic Homes Co., located in Toyonaka, Osaka Prefecture, western Japan, is concentrating on rental apartments featuring enhanced functions, such as energy conservation.
However, there has also been a notable increase in the prices of used condominiums. Yoshikazu Funakubo, a junior fellow in the real estate consulting department at Mitsubishi UFJ Trust and Banking Corp., said, "Around 100 million yen is a key threshold" for the contract price of a used property in central Tokyo.
Sumutasu Inc., a Tokyo-based company that buys and resells used condominiums, has experienced a significant rise in inquiries for properties priced between 50 million yen and below 70 million yen that offer good access to central Tokyo, according to company officials.
Following interest rate hikes by the Bank of Japan, more consumers are concerned about the burden of housing loan repayments. An official from the company noted, "More people are seeking direct transactions with sellers to avoid brokerage commissions."
In addition to the Tokyo metropolitan area, new condo prices have continued to climb in the Osaka and Kyoto areas, located in western Japan. In the northern city of Sapporo, "an increasing number of wealthy individuals are considering purchasing condos in prime locations," a real estate industry official said.
Given the potential for new condo prices to increase in urban centers outside the three major metropolitan areas of Tokyo, Osaka and Nagoya, Funakubo anticipates that more people will begin searching for new properties in more distant suburbs or opting for rental units.
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