House price surge unlikely to boost construction

Residential property prices in Japan have risen unusually fast since the launch of Quantitative and Qualitative Easing, led by an investment-driven surge in condominium prices. But there are signs that the rally in prices has run out of steam as household incomes have not kept up. And with the supply of new property already running well ahead of household formation, higher prices are unlikely to boost construction any further. Residential property prices in Japan have risen 8% since Mr Abe returned to power at the end of 2012, having been broadly flat for several years before. This is a much bigger increase than has been seen in the broader price level or in average wages over the same period. Driving the increase was a 30% increase in condominium prices. By contrast, prices of detached houses have been flat. The picture has been remarkably similar across the three main metropolitan areas of Tokyo, Osaka and Nagoya. Condominiums accounted for around 40% of the housing stock in 2013, the latest year for which comprehensive data are available, but their share tends to be higher in metropolitan areas: in Tokyo, they account for 70% of dwellings.