Tokyo condo sales plunge to 1992-low in sign Bank of
Japan boom deﬂating
04 October 2016
Sales of new condominiums in Tokyo have fallen to the lowest since the
nation’s 1990s property bubble collapse, a sign the real estate boom
fueled by Bank of Japan easing is starting to unwind.
New apartment sales in and around the country’s capital fell 32 percent
to 13,303 units in the first eight months of the year, the least since
1992, data from the Real Estate Economic Institute Co. show. Potential
buyers, faced with almost stagnant wages, are turning down 35-year
fixed-interest mortgages as low as 1.06 percent, near the record low of
0.9 percent in August, according to data from the state-run Japan
Housing Finance Agency.
stagnation in wages
"Stagnation in wages is why we are seeing a slowdown in sales of
condominiums" in Tokyo, said Takashi Ishizawa, a senior researcher at
Mizuho Securities Co. "If you look at interest rates, historically
speaking there has never been a better time to buy, but developers
without really good properties are having trouble selling."
The real estate market’s boom has been one of the few bright spots for
the world’s third-largest economy, and its slump could deepen the
nation’s deflationary mindset. The Bank of Japan’s (BOJ) move to target
the yield curve last month will probably trigger higher mortgage rates
and weigh on apartment prices, according to a report by Credit Suisse
Group AG. The central bank’s adoption of a negative-rates policy in
January misfired as the yen strengthened against the dollar, hurting
corporate profits and making Japanese companies even more cautious
about raising wages, according to Natixis SA.
Individuals, who have been cutting spending as the outlook for Japan’s
economy becomes more uncertain, are less willing to buy apartments in
Tokyo at current price levels, according to the Real Estate Economic
Institute. If Japan fails to boost wages, it will be difficult for it
to spur growth, the International Monetary Fund warned last month.
the average price of a Tokyo condo 63.28 million yen ($623,880)
The average price of a Tokyo condominium climbed to a 15-year high of
63.28 million yen ($623,880) in November, and prices remain 3.8 percent
higher than in 2015. Base wages in Japan are only up 0.2 percent in
"When wage growth is flat, you reduce purchasing power, and then you
have weaker consumption," said Kohei Iwahara, an economist at Natixis
in Tokyo. "It will make it even more difficult for the Bank of Japan to
achieve its inflation target."
In last month’s policy review, the BOJ said that lenders may become
more reluctant to extend loans if sub-zero rates were to excessively
reduce their earnings. BOJ Governor Haruhiko Kuroda told reporters the
central bank still has the option of lowering interest rates further if
"What I think is very dangerous is the presence of negative interest
rates" in Japan, said CME Group senior economist Erik Norland in a
Bloomberg Television interview. "Negative interest rates are meant to
ease monetary policy but they seem actually to have the perverse impact
of unintentionally tightening monetary policy."
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