Why condo sales in Tokyo crashed to 24-year low
Why condo sales in Tokyo crashed to 24-year low
Even with fixed mortgage rates at record lows, the Japanese shy away from apartment purchases
The sales volume of new Tokyo apartments hit 13,303 units between January and August this year, the lowest number of transactions in the Japanese capital since the housing bubble burst of 1992, Bloomberg reported, citing data from the Real Estate Economic Institute Co.
This means a plunge of 32 percent for new condominium sales in and around Tokyo from the same period last year. Such flagging interest in the city’s condos is occurring against a backdrop of historically low fixed mortgage rates, now being offered as low as 1.06 percent for a 35-year term, data from the Japan Housing Finance Agency showed.
The relative standstill of wage inflation has proven to be the major deterrent for potential home buyers, according to Takashi Ishizawa, senior researcher at Mizuho Securities Co. “If you look at interest rates, historically speaking there has never been a better time to buy, but developers without really good properties are having trouble selling,” he told Bloomberg.
Base wages in Japan have risen just 0.2 percent in 2016, Bloomberg reported.
More: Is time running out to buy in Tokyo?
Wages have stagnated partly as a result of the Bank of Japan’s recent easing policies, which have led to subzero interest rates over recent months. Reviewing the policy in September, the central bank noted that Japanese lenders may grow reluctant to accommodate mortgagors in light of the sub-zero rates and their consequently reduced margins.
“When wage growth is flat, you reduce purchasing power, and then you have weaker consumption,” Kohei Iwahara, an economist at Natixis in Japan, told Bloomberg. “It will make it even more difficult for the Bank of Japan to achieve its inflation target.”
There may still be tempting offers for buyers in Tokyo’s luxury property market though. Average prime property values in the city declined 4.4 percent to USD5.7 million in the year to June, according to Swiss bank Julius Baer’s recently released Wealth Report: Asia.
Read next: Not even the 2020 Olympics is helping Tokyo condo prices
Source: Property Report