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Japan commercial land prices end 6-year fall, led by big cities

Wednesday, March 18, 2015 - 16:05

[TOKYO] Japan's commercial land prices ended a six-year drop last year as easy money drove investment, but prices outside the biggest cities continued their two-decade slide, government data showed.

Nationwide prices were flat on average, recovering from a decline of 0.5 per cent in 2013 and ending a downtrend that has continued since 2008, according to the annual survey by the Ministry of Land, Infrastructure, Transport and Tourism.

The recovery was led by the Tokyo, Osaka and Nagoya regions, where prices rose 1.8 per cent, accelerating from 1.6 per cent in 2013.

Prime Minister Shinzo Abe's economic stimulus strategy, especially massive asset purchases by the central bank, have flooded financial markets with cash, much of which has flowed into stocks and real estate. "Low interest rates have been boosting investors' appetite for property trades," said Yoshihiro Seguchi, director of the ministry's Land Price Research Division.

Still, the figures showed the recovery has been uneven.

Excluding the top three metropolitan areas, prices fell 1.4 per cent for a 23rd consecutive decline. Land prices in 70 per cent of Japan's smaller cities fell last year, the ministry said.

The value of commercial property transactions in Japan rose 14 per cent to 4 trillion yen (US$33 billion) in 2014, beating the 2007 peak, said DTZ, a global real estate services company. The figure was the highest on record since the Chicago-based company started compiling the data in 2002.

Last year, Singapore's sovereign wealth fund GIC bought an office tower in central Tokyo from alternative asset manager PAG for 170 billion yen.

Property developer Mori Trust bought an office and retail complex Meguro Gajoen from US buyout fund Lone Star for about 130 billion yen. It was flipped earlier this year to a fund led by China's sovereign wealth fund China Investment Corp.

"A halt in the nationwide commercial land price slide means measures taken under the Abe administration are working," said Shigeko Mizutani, executive director at global property services company CBRE. "But the divide in land prices among regional cities is getting clearer." Nationwide residential prices fell 0.4 percent last year, their seventh consecutive annual decline.

The 10 biggest rises in residential land prices were all in Iwaki city in Fukushima prefecture, about 60 km (40 miles) south of the crippled nuclear power plant, as people from near the disaster area sought houses in nearby Iwaki, the ministry said.

The ministry surveyed land prices for 23,380 locations nationwide.

REUTERS

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