(Bloomberg) -- Commercial land prices in Japan rose by the most in a decade last year, thanks to a years-long tourism boom and ultra-low lending rates.
The average price of commercial land nationwide rose 1.9 percent, the most since 2008, the land ministry said on Tuesday. The average price outside the three biggest metropolitan areas rose 0.5 percent -- the first gain in 26 years.
The data indicate that Japan’s longest economic expansion in nearly three decades is playing out in pockets of the real estate market too, which is likely encouraging policy makers at the Bank of Japan who are trying to reflate the nation’s economy. Commercial land in areas of Hokkaido, a winter tourism destination, sub-tropical Okinawa and parts of Kyushu island saw some of the biggest gains.
“We feel that commercial land prices are rising on the back of an increase in foreign tourists and that’s spreading to regional areas,” Junichi Yoshida, the president of Mitsubishi Estate Co., said in a statement released at the same time as the ministry’s report. “In our building business, vacancies are going down and rent continues to go up.”
Average nationwide prices are calculated using individual parcels across the nation, instead of prefecture-level average prices. Showing the recovery in real estate remains patchy, commercial land prices fell in 55 percent of prefectures, the data showed.
The number of foreign tourists visiting Japan rose to a record high of 28.7 million last year, according to Japan’s tourism agency. This has had a big impact in some areas. In Kutchan, a small town near the famous Niseko ski resort in Hokkaido, commercial land was up nearly 36 percent, while residential land prices rose 33 percent.
The average nationwide price of residential land increased for the first time in a decade, by 0.3 percent, according to ministry data, but those gains were concentrated in a handful of prefectures. Average residential land prices fell in 66 percent of prefectures, the ministry’s data showed.
Tokyo again ranked near the top for gains in both residential and commercial prices. Prices for commercial land rose the most in Kyoto, by 6.5 percent, followed by Okinawa at 5.6 percent and Tokyo at 5.4 percent.
Tokyo’s Ginza shopping district remains home to Japan’s priciest single parcel of land, at 55 million yen per square meter (or $48,000 per square foot). It rose 9.9 percent from a year earlier and is well above the level seen before Japan’s property bubble burst in the early 1990s.
In comparison, the average price of residential land in Tokyo’s 23 wards is still 60 percent lower than the bubble-era high.
©2018 Bloomberg L.P.