Carefully determine changing demand for real estate as average prices fall
The following editorial appeared in Wednesday's Japan News-Yomiuri:
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Land prices in Japan, which had been on an upward trend, have begun to fall due to the spread of the novel coronavirus. The government and related industries need to closely watch developments in real estate demand.
The national average of land prices for all categories of use as of July 1 this year dropped for the first time in three years, according to a report on benchmark land values released by the Land, Infrastructure, Transport and Tourism Ministry.
By category of use, the national average of land prices for commercial areas, which are susceptible to economic fluctuation, dropped for the first time in five years. Commercial land prices in regional areas, which rose for the first time in 28 years last year, dropped again. The national average of land prices for residential areas further increased the range of reductions.
While a drop in land prices has the merit of making it easier to buy a home, it also deals a heavy blow to the entire economy.
Under such circumstances, the reduction in the value of assets has a psychologically negative impact on businesses and households, thereby resulting in adverse effects on investment and private consumption. There is a danger of the nation plunging into asset deflation that deprives the economy of its vitality. It is desirable that land prices shift stably.
What is worrisome is that structural changes are occurring mainly in the demand for commercial land.
Land prices have fallen sharply in areas where the number of foreign visitors to Japan had increased and transactions for hotels and commercial facilities had been brisk. In addition to local tourist spots, falling land prices have spread to downtown areas such as Ginza and Shinjuku in Tokyo, and...