Japan sees largest land price increase in 34 years

Japan's land prices increased at their highest rate in 34 years in 2024. A government survey revealed that average nationwide land prices, including residential and commercial properties, grew by 2.7% as of January 1. This marks the fourth consecutive year of price increases and the most significant rise since 1991, before a long decline followed the asset bubble burst. The rise in land prices is attributed to a steady economic recovery. The land ministry noted that the surge in inbound tourism has boosted demand for hotels and shops. Approximately 64% of surveyed plots saw prices exceed levels from 2020, before the COVID-19 pandemic. However, there are concerns about higher construction costs and potential interest rate hikes from the Bank of Japan. The central bank increased borrowing costs in July 2023 and again to 0.5% in January 2025. Officials have indicated they may continue tightening monetary policy if wages rise further. Both residential and commercial land prices have seen growth for the fourth consecutive year. Residential land prices rose 2.1% due to strong housing demand in a low-interest environment. Areas with good public transport links and tourist destinations saw increased buyer interest. Commercial land prices increased by 3.9%, particularly in popular tourist spots like Kyoto and Osaka, which experienced a rise in foreign visitors. Regions with redevelopment projects and semiconductor plants, such as Chitose and Kikuyo, also saw price increases driven by demand for housing and offices. Additionally, land prices in industrial areas rose by 4.8%, continuing a nine-year trend linked to e-commerce logistics developments. Major metropolitan areas, including Tokyo, Osaka, and Nagoya, recorded a 4.3% increase in land prices. The growth in four significant regional cities—Sapporo, Sendai, Hiroshima, and Fukuoka—was 5.8%, up for the 12th straight year, though it has slowed down due to rising construction costs.