Thursday, October 20, 2005


Sanyu System Research Institute, a major appraisal firm, has a contrarian opinion on the future of land prices in Japan. In an interview with the Nikkei, Akiyoshi Inoue said thathe expects land prices in Japan to fall by half in five years, citing the risk of oversupply lurking behind the current property bubble in central Tokyo. Excerpt:
Q: Despite your prediction, land prices in Tokyo's 23 wards recently registered their first upturn in 15 years. What do you think about that?
A: The recent upward trend in Tokyo has only been seen in places near new subway stations such as Roppongi and Shiodome, supported by the redevelopment projects there. But because I think the impact of those projects will not be sustainable, I have no reason to predict a further rise in land prices. Meanwhile, the supply of condominiums and office buildings will continue to rise rapidly… the impact of oversupply will begin to be felt more keenly in six months to one year.

Full Story (Nikkei) : Land Prices To Drop 50% In 5 Yrs On Office Supply Glut

I disagree with Mr. Inoue on the extent of the fall : land prices may fall by 40% in some places, namely towns and regions which are declining in economic activity and population, and those which have long depended on largesse from the central government for their economic growth. But in Tokyo, where a large proportion of economic activity is concentrated, the average land price is set to increase. Overall (and on a weighted-average basis) there could not be a 40-50% decrease as Mr. Inoue predicts.

Let me pause for a moment and strike Sanyu off my list of preferred appraisal firms.

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