REITs Causing Bipolarization Of Land Prices Based On Use Value

REITs Causing Bipolarization Of Land Prices Based On Use Value
2005/08/02, The Nihon Keizai Shimbun, page 0, 289 words

TOKYO (Nikkei)--The spread of real estate investment trusts (REITs) is a factor that is forcing the prices of some areas to rise and others to drop depending on use value.
The National Tax Administration reported Monday that land prices in Tokyo climbed for the first time in 13 years, a sign that such prices are bottoming out.
But while land prices in some areas in Tokyo jumped almost 20%, prices fell in other areas of the capital such as the Ueno and Kabukicho districts. This is in sharp contrast from the days of Japan's bubble economy, when land prices increased almost equally across the nation.
In one of Kyoto's shopping districts, the prices of the most expensive lots rose in two locations. In addition to a new, large commercial facility that opened there, foreign investors and others have been buying buildings for investment purposes, according to a local real estate appraiser.
The increase in properties handled by investment funds is believed to have pushed up prices in other locations such as Tokyo's Marunouchi business district and in areas around the main train station in Nagoya.
Meanwhile, the maximum prices of land plummeted 25% in Kofu, where the city center has been deteriorating. Prices there are now only about 12% of the peak in 1992. These prices tumbled because value created by the land, such as store sales and office rent, is seen as small.
Thanks to the popularity of REITs, present-value-based property appraisal -- a new way to assess land value -- has started to take root.
"Even if properties are in the same district, their prices can differ substantially depending on projected profit," says an official from a REIT management firm.