Residential land prices in central Tokyo have seen some of the most marked increases. Prices in the capital's 23 wards were up 4.8 percent on average from a year earlier, and the pace of increase was greater in all but one ward.
In Chuo and Minato wards, prices have surged over the past five years as high-rise condominium buildings have popped up. The price of land in Chuo has risen 23.4 percent, while Minato has seen a 28.1 percent increase.
The rising land prices have also made condos more expensive. The Real Estate Economic Institute, a private research firm, says the average price of new condos in Tokyo was 71.42 million yen, or about 642,000 dollars, in 2018. This is the highest it's been since 1991, when the asset-inflated economic bubble began to burst.
One factor behind the higher prices is aggressive buying by overseas investors. Foreign companies have been purchasing offices and condos in Tokyo to secure stable income streams from rent.
A Tokyo firm selling second-hand condos to Chinese and Taiwanese investors has experienced the effects of these changes firsthand. The company mainly deals in properties worth around 300,000 dollars, a class of unit popular because of the high rents that can be generated. Over the past few years, the firm has clinched over 100 deals annually.
But last year, the company saw this number decline almost 30 percent. This came as the rising values of new condos pushed up the prices of second-hand ones by 10 to 20 percent. The firm says the prices have caused foreign investors to adopt more cautious approaches, worried about the stability of rent profits.
Yoshi Tanaka, president of the firm, says just a few years ago, it would take investors only around two weeks to decide whether to buy a condo. But he says his company now has a difficult time selling properties if it doesn't offer discounts.
Takeshi Ide, a senior chief analyst at real estate research firm Tokyo Kantei, says the Japanese real estate market is at a crossroads.
He says the soaring condo prices aren't just due to the land price increases; Japan's labor shortage and higher material prices are also exacerbating the situation. He says current prices are unaffordable for ordinary people.
Ide says it's hard to imagine the trend suddenly reversing, but that he does expects the pace of growth to gradually slow.
He also says it's important to monitor the global economic situation, as developments like the downturn of the Chinese economy could lead to further changes.
If investment from China and Taiwan dries up, Japan's real estate market could be in for another shock. The future will remain blurry for some time and leaves buyers in an uncertain position.