Nothing stays forever. Jobs come and go and economies rise and fall. This too is reflected in the Japanese property market. The asset bubble of the late 1980s saw property prices skyrocketing to touch a peak at 3.08 million yen in 1990. Then wage growth stagnated and the economy languished. Japan underwent a long period of deflation. Since the bottom of 2002, real estate prices are again on the rise and is about to hit peak levels once again in Tokyo.
Data from Real Estate Economic Institute showed that new condo prices averaged about 2.87 million yen ($25,974) per tsubo (3.3 sq. meters) or the equivalent of $731 per sq ft, in the greater Tokyo region. This is a direct result of rising raw materials cost, increased wages for Japanese construction personnel and aggressive bidding prices for land parcels and an ultra-easy monetary policy from the Bank of Japan since 2013. Therefore Tokyo condo prices are inching towards 30-year highs, spurred on by low interest rates, easier housing loans and increased demand for new condos.
At the property peak in 1989, some condos in Tokyo fetched above the 1 billion yen mark. During the slum, real estate price per tsubo in 2002 were down 50 per cent from their peak.
The volume of units sold for the past three years numbered below 40,000 units per year.
Policy makers are not anxious. Rising property prices is aiding the economy to chug along.