will the good news not cease ?
bloomberg.com
Tokyo Land Prices Have First Gain in 15-Years (Update1)
Sept. 20 (Bloomberg) -- Land prices rose in central Tokyo for the first time since 1990 and spread to outlying districts of the city as Japan's economic recovery and demand from property trusts and funds helped boost values.
Commercial and residential real estate in the capital's 23 wards gained for the first time since 1990 in the 12 months ended July 1, the Ministry of Land, Infrastructure and Transport said in a report, supporting an Aug. 1 assessment by the National Tax Agency. Land zoned for commercial use rose 0.6 percent and residential areas were up 0.5 percent, while the decline in nationwide values slowed.
Tokyo acquisitions by domestic real estate investment funds and foreign investors that include Morgan Stanley and Lone Star Funds are boosting values in Tokyo's 23 wards, where land prices rose 0.9 percent in 2004, according to the National Tax Agency. The rise is supporting gains elsewhere in the capital and in other Japanese cities.
``The turnaround in real estate prices is broadening out from a few places in a few major cities to a more general stabilization,'' said Richard Jerram, chief economist for Japan at Macquarie Securities Ltd., before the report was released. ``The positive macroeconomic effect is becoming more significant.''
Nationwide, commercial and residential land prices dropped for a 14th year, the ministry report showed, with declines of 5 percent and 3.8 percent respectively, compared with 6.5 percent and 4.6 percent a year earlier.
``I don't think the recovery in land prices will expand to rural areas and it doesn't really matter,'' said Macquarie's Jerram. ``Those areas are a too-small part of the economy. What matters is what's happening in and around the major cities, and that's increasingly positive.''
Nagoya
Gains in Tokyo land values have also spread to Nagoya, an hour by car from the headquarters of Toyota Motor Corp. Six of the 10 commercial sites showing the biggest percentage gains in value were from Nagoya, with one plot in front of Nagoya station rising 31 percent, the report showed.
``It is now clear that land prices are bottoming out,'' said Hiromichi Iwasa, president of the Real Estate Companies Association of Japan and chief executive of Mitsui Fudosan Co. ``The property market is heading for a healthy transformation.''
Toyota plans to move some functions to the Midland Square Building, a joint development by Toyota and Mainichi Newspapers in front of Nagoya station, to improve efficiency. The 47-story building, to be completed in September 2006, may help drive land prices higher in that city, the land ministry said.
A new international airport that opened near Nagoya in February will also help business activities in the region, the ministry said. Japan Airline Co. and All Nippon Airways Co. are adding flights to the airport.
``Nagoya has been a more vibrant region partly because of cars, the exports and the new airport,'' said Jerram.
Tokyo
The recovery in other cities was helped by competition for buildings that generate returns in Tokyo, said Angus Muirhead, a property analyst at Lehman Brothers Japan Inc. said prior to the release of the report.
``The central Tokyo market is becoming crowded with buyers and the number of buildings available for sale is limited,'' Miurhead said, ``So the private funds and J-REITs are having to look further afield to find attractive yields.''
Commercial land prices in Nagoya City gained 0.6 percent, while they fell 2.2 percent in Osaka City, the government report showed.
``Demand from investment funds and J-REITs remains strong for good real estate where development and commercialization plans are in progress,'' said Keiji Kimura, Chief Executive of Mitsubishi Estate Co. ``In particular, real estate transactions in central Tokyo reflect rises in rents.''
Japan's economy grew at a 3.3 percent pace in the second quarter, triple the initial estimate, the Cabinet Office reported on Sept. 12.
Securitization
Market growth was prompted by regulatory change. To clean up bank bad loans, the Japanese government in September 1998 introduced real estate securitization, a financial tool that pools assets into tradable securities, making property investment easier and creating liquidity in the real estate market.
In 2001, Japan's first two real estate investment trusts -- Nippon Building Fund Inc., and Japan Real Estate Investment Corp. -- were established. The market value of Tokyo-listed funds has risen ninefold to 2.47 trillion yen ($22.2 billion), from 260 billion yen when the first REITs were traded.
Participation of investors through JREITS and private funds contributed to the land price recovery, Lehman's Muirhead said.
``The recent gains in land prices have been driven primarily by buying from J-REITs and private funds,'' said Muirhead. ``Over the last six or seven years, they have moved from insignificance to effectively representing the bulk of the buying market.''
Lehman Brothers estimates that as much as 90 percent of all office building purchases last year in five wards of central Tokyo may have been made by REITs. Their share of transactions was negligible just a few years ago.
Japan's 21 REITs on the Tokyo Stock Exchange bought a total of 17 properties for 42 billion yen in August, 44 percent more than the total value of purchases in July, according an estimate by Takashi Ishizawa, a senior analyst at Mizuho Securities Co.
To contact the reporter on this story:
Kathleen Chu in Tokyo at kchu2@bloomberg.net.
Last Updated: September 20, 2005 05:07 EDT |
