When considering the purchase or sale of a pre-owned condominium, understanding price trends is essential. Real estate prices have been affected by major economic upheavals such as the bursting of the asset-price bubble, the Lehman Shock, and the COVID-19 shock. This article analyzes, from an investor's perspective, the four factors that influence prices and the outlook going forward.
How have real estate prices moved in the past?
Japan's real estate prices, having passed through the bubble era and the mini-bubble era, are currently in an upward trend.
Around 1990: The Real Estate Bubble Era
Monetary easing following the Plaza Accord pushed land prices to their peak. Subsequently, the enactment of the Basic Land Act and the introduction of total volume controls caused the number of buyers to plummet, and the bubble collapsed.
Around 2008: The Mini-Bubble Era
The advent of real estate securitization products increased the number of buyers, but the Lehman Shock prompted foreign funds to withdraw, and prices fell.
Recent Trends
Against the backdrop of monetary easing and international events (the Tokyo Olympics), prices have continued to trend upward in recent years, as also analyzed in our article on the exit strategy for the central Tokyo condominium bubble.
What are the four factors that influence pre-owned condominium prices?
Four factors shape prices: international events, demographic trends, the productive green land issue, and the consumption tax.
International Events
Decisions to host events such as the Olympics or a World Expo heighten interest from overseas investors and have the effect of pushing real estate prices higher.
Population Inflows/Outflows and Inbound Tourism
Population concentration in major cities and rising inbound tourism are key factors that boost housing demand.
The Productive Green Land Issue
The lifting of productive green land designations could result in a large supply of residential land, but government easing measures are expected to prevent any sudden price decline.
Consumption Tax Hikes
Last-minute demand before tax increases and the subsequent drop in demand cause price fluctuations.
What impact did the COVID-19 shock have on pre-owned condominium prices?
Pre-owned condominiums are considered relatively resilient to the impact of the COVID-19 shock. While the number of newly built units released for sale declined, the number of contracts and prices for pre-owned condominiums have shown no significant fluctuations since the Lehman Shock. Newer properties and those in prime locations continue to enjoy strong demand.
Frequently Asked Questions (FAQ)
Q. When is the right time to buy a pre-owned condominium?
Make your decision by watching the balance between interest rate trends and supply volume. In a phase of rising interest rates, the number of sellers tends to increase, which may favor buyers.
Q. Will pre-owned condominium prices fall due to COVID-19?
Data as of 2020 indicates that the impact on pre-owned condominium prices was limited. In fact, a tendency emerged for demand to shift toward pre-owned units due to reduced new supply.
Q. What factor has the greatest impact on pre-owned condominium prices?
Monetary policy (interest rate levels) and demographic trends have the greatest influence.
Recommended Reading
- Wealthy Foreign Investors Accelerate Luxury Real Estate Investment in Japan
- Asset Strategy in a "World with Interest Rates" | The Era of a Shrinking Yield Gap
