Mixed signals point to uncertainty for Japan’s housing market

Hit by a double whammy of political and economic uncertainty, Japan’s housing market remains fragile as ever in the first few months of 2010.  Sales of land, condominiums and other real estate fell.

As of April 2010, the average price of new condominiums in Tokyo was JPY46.16 million (US$503,827), according to figures from the Land Institute of Japan. Although it was higher by 6.8% compared to the same month last year, it was down by 8.95% compared to the previous month.

A similar pattern was also observed for prices of existing condominiums and detached houses in Tokyo. The average price of existing condominiums was JP¥25.36 million (US$276,800), up by 3.2% y-o-y but lower compared with JP¥25.45 million (US$277,780) average price in February. For detached houses, the average price was JP¥32.1 million (US$350,365), lower by 1.5% y-o-y and 0.7% m-o-m to April 2010.

The performance of residential urban land prices, the benchmark for the housing market, is also disappointing. In Q1 2010, the national price index fell 4% from a year earlier. Over the same period, the index for six major cities (Tokyo, Yokohama, Nagoya, Kyoto, Osaka and Kobe) was lower by 4.7%. It was down by 3.9% for other areas.

In 2006-2007, rising residential urban land prices showed glimmers of hope for the two-decade-long housing market slump. These hopes have been dashed by the global financial crisis and a series of political snafus leading to a merry-go-round of Prime Ministers. Since September 2006, Japan has had five PMs: the first three lasted only a year in office each and the fourth, Yukio Hatoyama, resigned in June nine months into the job after failing to implement a key electoral promise regarding the closure of a US base in Okinawa. The latest PM, Democratic Party leader Naoto Kan, assumed office on June 8.