July 3, 2020
Episode 16 - Coronavirus pandemic’s impact on real estate transactions - 2020 Tokyo Real Estate Transactions

The unprecedented coronavirus pandemic continues to bring chaos to all aspects of everyday life and have significant impact on our economy, health infrastructure, and the education system etc. After a month-long state of emergency, most businesses in Japan have resumed operations though the crisis has not been completely overcome yet. Tokyo real estate business does not seem to have stopped even under such circumstances. In this episode, we will reveal to you how coronavirus pandemic had impacted Tokyo housing market.

Though the economic blow caused by the infectious disease, Covid-19 which is different in nature from the Lehman Shock, we might still gain some insights from what happened and how Tokyo real estate market got through that crisis with time. Just within 2 years after the Lehman Shock from 2008 to 2009, Tokyo real estate market rose to its previous level before the crisis that caused a huge price drop of 20%. Now, let’s take a look at the trends this year that is expected to be greatly affected by the coronavirus pandemic.

Average property price

 

 

 

 

 

 

 

 

 

 

 

 
 
Reference: Prepared by International Interface based on REINS data (From January to May, 2020). Areas: Tokyo city, Kanagawa, Chiba, Saitama, Sapporo city and Sendai city are included.

 

<Average transaction price>

The above graph shows the average transaction prices of old houses and condominiums from January to May this year. Let’s look at the period just before Japan was hit hard by the coronavirus pandemic. The average price of used condominiums only dropped slightly from in January and February and the price level were considered to be high as they were 11.5% and 2.7% higher respectively compared to the year before. There was much greater impact on the market beginning April, the price level dropped by 5.8% compared to the year before. However in May, the price level started to recover and rise to almost the same level as of last year (-0.9% compared to its previous year).       

In the used housing market sector, the average transaction price level started to fall in March (-2.8% compared to last year) and the price level dropped by 12.5% and 16.2% in April and May respectively compared to last year.

The transaction price was declining significantly over this period, what was the impact on the average size of properties sold?

Average area of property sold

 

 

 

 

 

 

 

 

 

 

 

 
Reference: Prepared by International Interface based on REINS data (From January to May, 2020). Areas: Tokyo city, Kanagawa, Chiba, Saitama, Sapporo city and Sendai city are included.

 

About the property size

From the above, we can see clearly that the fluctuation of average occupied area of various properties sold from January to May in 2020. It is quite interesting to see the occupied area of used condominiums and houses have remained virtually flat whilst the average area of land sold has actually a tendency to increase throughout the period.

You might be intrigued to find out that the average land size for houses has remained at high level that increased by 9.2% and 1.8% in April and May respectively compared to the year before whilst the transaction prices of houses actually dropped sharply in this period in comparison to last year.

At last, let’s look at number of transactions that probably shows clearly how coronavirus pandemic had its huge impact on real estate market.

No of transactions

 

 

 

 

 

 

 

 

 

 

 

 
*Reference: Prepared by International Interface based on REINS data (From January to May, 2020). Areas: Tokyo city, Kanagawa, Chiba, Saitama, Sapporo city and Sendai city are included.

 

We can see clearly from the above graph that the sales of condominiums and houses were greatly affected by the coronavirus pandemic especially in the month of March and April. However, the decline did not seem to continue, the market appeared to have picked up slightly in May. Though it is still a big unknown what will happen next, the Lehman shock incident however showed us that the market took less than 2 years to get back to its previous level, it is also possible this time that Tokyo real estate market could recover sooner than expected.

The uncertainty around coronavirus is having a big impact to the economy. As a buyer, one might have greater desire to live in a bigger property if working remotely is made possible, or the other might also try to take advantage of the current coronavirus pandemic situation to negotiate further on price in case seller is eager to sell sooner.

It is still unclear when this coronavirus pandemic will end, the timing of buying or selling and also ways of how to operate would matter to make it a profitable investment. As a general theory in Japan, the price level of a used property shall not drop beyond a certain extent when the property is still within a certain age and is purchased under a mortgage.

In the next episode, we will talk about the reliability of properties in Tokyo. Stay tuned!

 

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Disclaimer:

Neither International Interface nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.