Japanese land prices fall to 1982 level (54% OF PEAK VALUE)

Asahi Weekly (English Version) ^ | 3 June 2003 | Asahi Shimbun

[shrinkermd]

Land prices nationwide at the end of March fell to levels not seen since March 1982, the Japan Real Estate Institute said.

The prices averaged 54.9 percent of their September 1991 peak, the group found in a survey.

The survey, which is conducted every March and September, covers 2,000 locations in 223 cities nationwide. This March it showed land prices had fallen continuously for 11 years.

The institute forecasts a further decline ahead.

The land prices as of the end of March nationwide had fallen 3.7 percent from the previous survey last September, and 7.1 percent from a year before.

Long-term devaluation has been especially pronounced in six major cities-Tokyo's 23 wards, Yokohama, Nagoya, Kyoto, Osaka and Kobe.

In the latest survey, land prices in the six cities had fallen to 26.5 percent of their peak at the end of September 1990.

As for land use, prices for commercial-use land fell 9.9 percent from a year earlier. The national average price for commercial land at the end of March was 37.6 percent of its peak at the end of September 1991, putting it on par with land prices at the end of September 1973.

The average land price in residential areas nationwide fell by 4.8 percent year on year. Suburban areas and regional cities saw a greater decline than the year before, due to an ongoing migration to the Tokyo area.

Prices of land used for industrial purposes, meanwhile, fell by 6.1 percent year on year on average, as a growing number of companies have been reducing production or shifting it overseas.(IHT/Asahi: June 3,2003)

[shrinkermd]

When the powers that be speak of "deflation" they are talking about asset deflation --stocks, bonds, real estate and so forth. The consequences of such "deflation" can scarcely be over estimated. For example if you hold a mortgage for 75% of your homes value and the property deflates to 50% of its former value, it no longer pays to keep the property.

Look for herculean efforts by the Fed and our government to avoid asset deflation. The question will be the unintended consequences of their efforts.

[tm22721]

We will follow the Japanese model and deflate what are horribly overvalued assets.

BUMP

[Fury]

When the powers that be speak of "deflation" they are talking about asset deflation --stocks, bonds, real estate and so forth. The consequences of such "deflation" can scarcely be over estimated. For example if you hold a mortgage for 75% of your homes value and the property deflates to 50% of its former value, it no longer pays to keep the property.

What if you were planning to stay in the house for a long period of time?

[Phantom Lord]

I remember the left throughout the 80's talking about how horrible Reagan was and that because of his policies the Japanese would OWN the United States in a few short years. After a big spending and buying spree of American icon assests such as Rockefeller Center, Pebble Beach, etc... they thought they were right. Then BOOM. Japan collapsed and Americans bought back the properties at gigantic discounts.

[MonroeDNA]

"We will follow the Japanese model and deflate what are horribly overvalued assets. "

Wrong. Japan's real estate was overvalued for 20 years. It is just takiing this long to come down, due to the inherent resistance to embarrassing their bankers and business owners. It was a cultural problem, that led to an economic one.

The US is in no danger of a massive real estate collapse, except in super-inflated areas like CA. But then again, in CA it is aslo a cultural issue. The greens prevented development, so prices skyrocketed. Then the people fled when the area became economically blighted, hence the real estate problem in CA.

[shrinkermd]

"What if you were planning to stay in the house for a long period of time?"

It would be a matter of choice. If your mortgage is worth more than the property is worth, you will need to decide whether to tough it out or sell and buy something else. In the past, real estat prices for the most part have recovered but only after very long periods of time.