Wednesday, September 28, 2005

Japan Land Prices : Navigating the Data Jungle

Some additional notes on the ‘official land price’ news recently in the headlines : there are actually four types of government land prices. The set of numbers just published last week, called kijun chika, are surveyed by each prefecture as of July 1 each year, and covers 26,521 sites across Japan. Along with the central government’s officially published land prices (kouji-chika, see below), they serve as a yardstick for property transactions in Japan. The surveys are based on assessments by real estate appraisers, who, taking into account profitability and transactions in neighboring areas, determine values for 1 sq. meter plots. The assessments assume that the land is utilized as efficiently as possible. There are also two other types of official land prices, used for tax and valuation purposes, as well as the actual transaction price. Here is a quick rundown:

  1. The kouji-chika (appraised land value) is published annually by the Ministry of Land, Infrastructure and Transportation on April 1, gives prices for around 30,000 points nationwide, focusing on urban areas.

  2. The kijun-chika (average residential and commercial land price) is published annually by each prefecture on July 1 for around 25,000 points nationwide, based on local land appraisers’ reports. This measure also covers non-urban areas such as forest and agriculural land.

  3. The rosenka (prices of land fronting major roads) is published by the National Tax Administration Agency and is comprised of two different measures: the koteishisanzei (fixed asset tax) rosenka and the souzokuzei (inheritance tax) rosenka. The souzokuzei rosenka is the most widely used value for roughly estimating land values in relative locations. The rosenka is published each October.

  4. The koteishisanzei-hyokagaku (assessed value of fixed assets) is computed by the Home Affairs Ministry every three years for all taxable properties, and forms the basis for property tax (Fixed Asset Tax and Urban Planning Tax) calculations. The value is not commonly disclosed except to the taxpayer in question.

  5. The actual transaction price of real estate, or jisei-kakaku. This is the market price, and can be vastly different from the official prices of land. Under the current climate, sellers are usually able to get their asking price for well-located properties. For developed commercial properties this is commonly a 4-6% cap rate on projected NOI. For empty commercial land, transaction values vary widely depending on the projected use – retailers may pay a very high premium for certain locations.
The first three official sets of numbers are readily available on the Internet from each government agency. They are also accessible free through the Japan Land Price Map.

In spite of the multiple measures above, these land pricing systems are roughly correlated. For example, kouji-chika is an average value of transaction prices in a block. The rosenka gives approximately 80% of the koteishisanzei-hyokagaku, which in turn is approximately 70% that of kouji-chika values. Of course, these percentages are not absolute, and will differ from location to location.

In my experience, kijun chika and kouji chika are commonly used by economists to determine trends in land values, while real estate practitioners use rosenka more often. Japanese appraisers use all the above indicators in their reports. Tas Japan offers a (paid) web-based automatic appraisal service, based on the official figures, recent transaction data, and user-inputed factors such as location, land size and situation, and building type and age. Finally, AdPark has extensive land listings for the Tokyo and Osaka metropolitan areas in English.

Japan Real Estate / Property Investment Blog


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