Land prices rise in Japan as inbound tourism increases

The average price of land in Japan has gone up for the third year in a row, following recovery from the coronavirus pandemic. The price increase is attributed to a boom in inbound tourism pushing up demand for accommodation, and ongoing redevelopment projects around the country.

The National Tax Agency announced the new numbers on Monday, as they are used to calculate land tax. It says, as of January 1, the price of land along major streets at about 320,000 locations was up 2.3 percent from the year prior. The year-on-year increase was the largest since 2010 in percentage terms.

The rise has been seen in 29 of the country's 47 prefectures.

The highest rate of increase was 5.8 percent in Fukuoka Prefecture, followed by 5.6 in Okinawa Prefecture, and 5.3 in Tokyo.

Ginza Chuo Street in Tokyo's Ginza district marked the highest land price in the country for the 39th year in a row. The rate of increase was 3.6 percent. The price marks 44.24 million yen, or 276,500 dollars, per square meter.

Ginza Chuo Street marked the highest land price in Japan for the 39th year in a row.

Inbound and redevelopment project

The highest rate of increase is 32.1 percent in Hakuba Village in central Japan's Nagano Prefecture, followed by 24 percent in Kikuyo Town in the southwestern prefecture of Kumamoto.

Hakuba Village is a popular tourist destination throughout the year. In winter, the village sees large numbers of skiers and, in summer, hikers from inside and outside Japan. After the coronavirus pandemic ended, it has been receiving even more foreign tourists than before, leading to the construction of accommodation facilities one after another.

Hakuba is known for its fluffy snow.

Land prices are increasing in Kikuyo Town for a different reason.

Since the world’s largest contract chipmaker, Taiwan's TSMC, opened a factory in the town in February, many semiconductor companies followed suit.

The expansion of these companies has not only boosted the local economy but the ripple effect has reached the real estate business in neighboring Ozu Town. For example, one real estate company had mainly been selling and brokering single-family houses, but has recently started building a condominium.

Its 12-story condominium, located about 5 minutes by car from the TSMC factory, was bought by a Taiwanese company for hundreds of millions of yen.

New homes for families under construction in Ozu Town, Kumamoto Prefecture

Murakami Takayori, the head of the sales department of the real estate firm, says he views the opening of TSMC's new factory as a business opportunity and will continue to secure construction sites.

The trend is expected to continue

An expert expects the trend to continue for the time being but there are two points of concern — rising interest rates and skyrocketing construction costs.

"These factors may discourage people from buying homes, which would have a negative impact on land prices," says Yoshida Tasuku, a researcher at the NLI Research Institute, a private think tank.

Researcher Yoshida Tasuku says further increases in interest rates and housing prices would affect land prices.

He also said that Japan will enter a phase of population decline, and that land prices are expected to fall in areas where the population has decreased and commercial activities will only continue in the major cities, creating a gap.