Summary of White Paper on Land (2002)

I  Socio Economic Factors affecting Land Use in Japan

Chapter 1  Socio Economic Changes and their Implications for Effective Land Use


Section 1  Structural Changes in the Land Market in Japan

1.  Movement towards a Land Market in line with Actual Demand

Until the bursting of Japan's bubble economy, there was a tendency to invest in land from the point of view of building up assets. This was on the premise that land prices would continuously rise. However, as a result of falling land prices - a trend that has extended for a long period beyond the bursting of the bubble - profits nowadays cannot be made by simply owning land, and in fact can only be made by making effective use of it.


For example, compared to land purchased in 1971 (just before the boom associated with the "Plan for Remodeling the Japanese Archipelago") average land prices in recent years have increased much less than nominal GDP growth, and also less than increases in the Consumer Price Index.


Chart 1-1-1  Trends in Nominal GDP, the Consumer Price Index and Land Prices in Six Large Metropolitan Areas of Japan
Chart

Sources:"Annual Report on National Accounts" by Cabinet Office, "Annual Report on the Consumer Price Index" by Ministry of Public Management, Home Affairs, Posts and Telecommunications, and "Land Price Index for Urban Areas" by Japan Real Estate Institute
Note:The figures in each year are indexed to 1971, based on an index in 1971 of 100


2.  Changes in General Public and Corporate Perceptions Concerning Land

As explained below, general public and corporate perceptions about land have been changing dramatically in Japan:

(1)  Views about how Lucrative Land Ownership is as a Valuable Component in People's Assets

In response to the question about whether land is considered a lucrative asset compared to postal savings, bank deposits and stocks, the number of people who answered "I do not think so" and "I think so", respectively, were almost the same in the current survey. But when we compare the current response with trends from the first survey, the number of people who answered "I think so" has decreased substantially.


Chart 1-1-2  Land as a Lucrative Asset Compared to Postal Savings, Bank Deposits and Stocks
Chart

Source:"The General Public's Opinion on Land Issues" (January 2002) by Ministry of Land, Infrastructure and Transport


(2)  Corporate Views about the Lucrativeness of Land Ownership

In relation to land and buildings, the number of corporations which consider "ownership to be lucrative in the future" was lower than the number of corporations which consider "land leasing and rental to be more lucrative". This is the same general result as the previous survey; however, the view that "land ownership is lucrative" has declined even further this time around.


Chart 1-1-3  Perceptions of the Lucrativeness of Land Ownership in the Future

Chart

Source:"A Survey of Company Activities in relation to Land Ownership and Use" (January 2002) by Ministry of Land, Infrastructure and Transport


3.  The Trend Towards Individualizing Land Price Formation

The current land market in Japan has been changing structurally towards a market that moves in line with actual demand. A feature of the current trend in land pricing is that in areas enjoying high levels of convenience and profitability, the rate of the land price decline has either diminished or land prices have actually increased. But in areas of low convenience and profitability, land prices are still declining.

For example, based on "published land price" data for central commercial districts, if we observe the rate of land price fluctuation in various areas, we will see that prices declined uniformly across all areas in 1994. In 2002, however, the rate of price fluctuation varied from area to area, with some areas attracting higher land prices and other areas attracting lower land prices.


Chart 1-1-4  Rates of Land Price Fluctuation in Commercial Areas in Central Five Wards (a comparison between 1994 and 2002)
Chart
Source:"Published Land Prices" by Ministry of Land, Infrastructure and Transport
Note:The commercial areas surveyed were in five Central Tokyo wards (Chiyoda, Chuo, Minato, Shinjuku and Shibuya)


Also, when we examine rates of land price fluctuation over the last 10 years at various points in the published land prices, the figures show us that the higher the land price is, the lower the rate of price decline.


Chart 1-1-5  Rates of Land Price Fluctuation in the Five Commercial Areas of Central Tokyo (accumulated between 1992 and 2002)
Chart

Source:"Published Land Prices" by Ministry of Land, Infrastructure and Transport
Note:Land prices have been continuously published at 82 points in the commercial districts of Five Central Tokyo Wards (Chiyoda, Chuo, Minato, Shinjuku and Shibuya) between 1992 and 2002


As explained above, it is necessary to scrutinize land price movements in detail in various areas, and at various locations. It is no longer appropriate to discuss market movements as if they apply uniformly across all areas based on trends in the "average land price".


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