• Home
• About/Contact
• Economic Reports
• Research
• Advertising

• Business
• Economics
• Reports
• Finance
• Marketing
• Politics
• Real Estate
• Services
• Retail
• Tech

Subscribe

Tokyo area new condo sales to increase 11.6% in 2009: Real Estate Economic Institute

Earlier today, the Real Estate Economic Institute released a report predicting that sales of new condominium units will increase by 11.6% in the Tokyo area and 7.6% in the Osaka area in 2009.

Sales of new condos in the Tokyo area alone fell 26.0% in October and 14.9% in November, according to data released earlier this week by the same institute. The report released today predicts that 2008 sales will show a 31% fall when all is said and done. That would put 2008 sales at 42,102 units.

If sales in the Tokyo area do increase by 11.6% in 2009, that would mean a total of about 47,000 units will be sold next year. The estimates for the Osaka area would see an increase from 23,231 units in 2008 to about 25,000 in 2009.

(Side note: Why are these projected numbers so perfectly rounded?)

Is this possible?

There are two trends that make such a conclusion difficult to accept. First, although sales declined less in November than the projected overall 2008 figures, it is difficult to imagine sales remaining consistently positive in year-on-year terms for some time. January 2008 sales were the lowest seen in the past two years in the Tokyo area, at 2,320 units, so a slight increase in year-on-year sales would hardly come as a shock. However, we should keep in mind that while average bonuses increased slightly last winter, they have been projected to fall this winter. Of course, we are also continuing to see a decay in consumer confidence, which is now at historical lows.

Sales were also notably weak in April, June, July and September of 2008. The Real Estate Economic Institute must be looking at a combination of oversupply, heavily discounted prices and the chance that the economy will begin to turn around from the third quarter of next year - or at least that consumer sentiment, wages and propensity to spend will be better.

We already know that Daiwa House, Japan’s largest home builder, is considering cutting prices on new homes and apartments, and may be making some sales at a loss in 2009. This brings us to the second trend that seems to stand against the Real Estate Economic Institute’s prediction: rising prices. As sales have continued to decline, prices are still on the way up. In November, the average price of a new condo in the Tokyo area was up 7.1% to about 50.15 million yen. In November 2006, the average condo in the Tokyo area sold at about 42 million yen.

In each of the first eleven months of this year, the average new condo in the Tokyo area has sold at a higher price than in 2007. This trend cannot continue forever, and builders are going to have to cut prices in order to slim inventories. However, although it is the largest of Japan’s homebuilders, Daiwa House has probably been hit the hardest by the downturn in sales. In fact, six of the eight major homebuilding firms are expecting to see increases in operating profit for fiscal 2008, mainly due to successful cost-cutting measures. In other words, if Daiwa House has room to sell at a loss to move inventory, many other firms are in a better position to do so.

The big question is thus whether new condo prices can come down to a level that would allow growth in sales in the current buyer-shy environment. While this is not impossible, and it’s difficult to imagine sales getting much lower than they have been thus far in 2008, I find it difficult to accept that an 11.6% increase in sales for the Tokyo area can be projected.

Comments

Copyright © 2006-2010 Japan Economy News

Privacy Policy | Disclaimer