Tokyo condo prices fall for two months in row in sign boom may fade

[TOKYO] Used condominium prices in central Tokyo fell for second month in March, stoking concerns that Japan’s property boom may be losing momentum.

Average prices of previously occupied apartments in the six central wards of Tokyo fell 0.2 per cent in March from the previous month to 187.3 million yen (S$1.5 million), according to data released on Thursday (Apr 23) by research firm Tokyo Kantei Co. That was the first back-to-back decline in more than three years.

Weighing on market sentiment are signs that policymakers are growing cautious about rampant spending by investors that may drive away home buyers.

The Bank of Japan said last month that it will closely monitor real estate loans by regional banks, while local governments have warned against quick reselling of properties. There is also the risk that the Middle East conflict will further push up the cost of living and weaken consumer demand, a negative for the housing market.

“If inventory piles up further and the proportion of properties with significantly reduced price tags increases, the market will enter a correction phase,” said Tokyo Kantei researcher Masayuki Takahashi. “If the situation in Iran leads to higher oil prices and supply concerns, the real economy may be affected, and consumer sentiment could cool down due to uncertainty about the future.”

The condo price drops in February and March were relatively small, decreasing 0.2 per cent in both months, with prices adjusted to represent 70 square-metre properties. That means it may be premature to say that prices have entered a correction phase, though the impact of factors such as the war in Iran needs to be watched, said Takahashi.

Some local governments have been taking action to address affordability concerns for homebuyers. Chiyoda Ward in central Tokyo said in July that it asked developers to ban sales of condos within five years of purchase. Kobe City in western Japan, meanwhile, is considering introducing a tax levied if apartments are left vacant.   

Condo prices in central Tokyo have passed 1980s bubble economy era levels in recent years as an influx of domestic and overseas investment drove up demand. The average used condo price in central Tokyo has soared almost 90 per cent since the start of 2023, according to Tokyo Kantei data.    

Price trends of used condos are a useful metric for the real estate market because they tend to reflect supply and demand more clearly than new apartments, according to Takahashi.

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Average prices of new condos in the Tokyo metropolitan area, including the surrounding prefectures of Chiba, Saitama and Kanagawa, fell 0.7 per cent from a year earlier to 104.1 million yen, the first decrease in 11 months, according to Real Estate Economic Institute data. 

For used condos, price moves in the rest of Tokyo indicate that while the most expensive areas declined, there is still strong demand for properties in the capital. The average used condo price for all 23 Tokyo wards, which are like mini-cities with their own local governments, rose 0.6 per cent to 124.3 million yen, marking the 23rd straight month of increases, Tokyo Kantei data show. BLOOMBERG