Japan's Land Prices Surge at Fastest Rate in 34 Years, Driven by Tourism and Economic Growth

According to a government survey released Tuesday, Japan's land prices experienced their most significant surge in 34 years in 2024, with recovery extending to regional areas, fueled by sustained economic growth.

The Land Ministry survey indicates that average nationwide land prices, encompassing both residential and commercial properties, rose by 2.7% as of January 1. This marks the fourth consecutive year of gains and the most substantial increase since 1991, prior to the collapse of the asset "bubble".

The Land Ministry stated that Japan's overall land prices sustained their upward trend, propelled by moderate economic recovery.

The survey attributes the land price gains to a surge in inbound tourism, which has boosted demand for hotels and shops. Approximately 64% of the surveyed plots now exceed pre-pandemic levels from 2020, according to the ministry.

However, the survey also reveals concerns within the market regarding potential impacts from increased construction costs and further interest rate hikes by the Bank of Japan.

A Land Ministry official noted that concerns were raised about the outlook due to higher construction costs and expectations of higher interest rates.

The survey also highlights that both residential and commercial land prices increased for the fourth consecutive year. Residential land prices grew by 2.1%, driven by consistent housing demand in a low-interest-rate environment. Commercial land prices increased by 3.9%, with popular tourist destinations like Kyoto and Osaka experiencing continued growth, fueled by a record number of foreign visitors to Japan in 2024, the ministry said.

Areas with semiconductor plants, such as Chitose city in Hokkaido and Kikuyo town in Kumamoto prefecture, also saw rising land prices due to strong demand for housing and offices, the ministry said. Land prices in industrial areas climbed 4.8%, marking the ninth consecutive year of growth, supported by the development of large-scale logistics facilities for the e-commerce market.

Japan's three major metropolitan areas surrounding Tokyo, Osaka, and Nagoya showed a 4.3% gain in land prices, up for the fourth straight year. The four major regional cities of Sapporo, Sendai, Hiroshima, and Fukuoka rose 5.8%, up for the 12th straight year but slower than in 2023 as rising construction costs weighed.