Japan's stock market is booming. The Nikkei Stock Average, a popular index for the Japanese stock market, reached a 15 year high in February 2015, continuing its growth through March. The Japanese Government is further easing monetary regulations, increasing public spending and developing a more comprehensive economic policy. Exports, on the rise due to depreciation of the yen, have had a positive effect on the economy. Within the nation's 150 major cities and busiest districts, the 2014 fourth quarter (1st Oct – 1st Jan) has shown an 80% growth - increased land prices were recorded in 125 of those districts, with prices remaining level in the remaining 25. None of the districts suffered a decline.
According to a report by the Real Estate Economic Institute – Jan 2015, the number of condominiums sold in the Tokyo metropolitan area was 1,679 units - 8.1% less than the same time last year. On average, prices for new condominiums rose 2.8% with the cost per square meter increasing 6.7%. Sales continue their upward climb and inventory remains low. Population inflow remains substantial; in just the past year, 95,000 new residents have made Tokyo their home (1st Jan Tokyo Government data). This steady increase helps explain positive sales.
There are two reasons for the upturn in new condominiums sales. The first is that land prices are climbing due to the need for condominiums in metropolitan areas. The second is the construction costs associated with reconstruction demand and urban developments. The Yen's depreciation has had a considerable effect on the cost of materials, leading to the decrease in supply for new condominiums and construction projects. Supplies for new condominiums dropped 21% across Japan compared to last year - 20.5% in Tokyo, 26.7% in the 23 wards. According to the Ministry of Land, Infrastructure, Transport and Tourism, 2014 saw a 10.4% drop in condominium construction when compared with last year. For the time being, projected supplies for new condominiums remain low.
At the same time, the number of available second-hand condominiums has declined. According to the Real Estate Information Network for East Japan’s monthly report on used second hand condominium distribution, the number of available second hand condominiums in January 2015 fell by 7.0%, i.e. 134,285 fewer units than in the same period the previous year. This decrease has triggered noticeable price increases in Chiyoda, Minato and Chuo Wards, where the per square meter price has shot up 6.9% in just the past year - and several Southern Wards, i.e. Shinagawa, Ota, Meguro, and Setagaya, have seen an even greater rise of 12.5%. These second hand condominiums are located alongside new condominiums, whose prices are on the rise as well.
Foreign investors have played no small role in the demand for these properties. According to the Japan National Tourist Organization, the country witnessed a considerable increase in visitors of 29.4% (13,410,000 people). In December alone, there was a remarkable 43% increase over the entire previous year. And with the depreciation of the Yen, the number of tourists is expected to continue rising. There are many urban developments planned for Tokyo - and smart foreign investors understand that Japan is a profitable market. NOW is the time to consider investing in Japan.
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