(TOKYO) Average land prices in Japan fell 8 per cent in the year to Jan 1, the biggest drop in more than a decade, a government agency said, in a sign the country's real estate market is still reeling from the global financial crisis.
The 2008 financial crisis and the recession that followed in Japan have battered demand for housing, while tight credit has made it hard for developers to raise money and overseas investors have withdrawn their funds.
It was the second straight year of decline in nationwide land prices, which averaged 126,000 yen ($1,993) per square metre, after a 5.5 per cent drop the year before, according to the survey by the National Tax Agency, which covered about 380,000 building lots.
That marked the biggest decline since an 8.3 per cent fall in the year to Jan 1, 1997, with land prices down in all Japan's 47 prefectures last year.
Tokyo suffered the biggest drop of 11.3 per cent, which was its fastest rate of decline in 14 years.
The cost of a land plot in Tokyo's upscale Ginza shopping district plunged 25.6 per cent, its biggest slide in 16 years, though it is still the most expensive place in Japan at 23.2 million yen per square metre.
Japanese land prices had dropped for years following the collapse of the real estate bubble in the early 1990s, leaving huge piles of bad loans in the banking sector and crippling the economy for a decade.
They finally began picking up in the mid-2000s, helped in part as foreign investors poured money into urban developments.
But the upturn was short-lived as the global financial crisis shook the market in 2008.
Property prices in Tokyo and its neighbouring prefectures fell 9.7 per cent. In the vicinity of Osaka in western Japan, land prices dropped 8.3 per cent, while those in the central Japanese city of Nagoya and its neighbouring areas tumbled 7.6 per cent.
Average land prices in rural areas also fell 5.9 per cent.
The tax agency assesses land prices as of Jan 1 every year to calculate inheritance and gift taxes on properties that are acquired that year.
Land prices calculated by the tax agency are roughly at 80 per cent of those published by the land ministry in March.
Analysts say the prices tend to lag behind actual land price movements. -- Reuters
Source: Business Times, 2 Jul 2010