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
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
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:
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
(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
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)
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)
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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