Rising Land Prices an Opportunity to Increase Wages, Purchasing Power

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According to the Ministry of Land, Infrastructure, Transport and Tourism, as of January 1, nationwide average land prices for all uses rose 2.7% in 2024, year-on-year. This marked the fourth consecutive year they had increased.

The growth rate was the largest since the collapse of the bubble economy. It was 0.4% higher than the 2023 rate of increase, which topped 2% for the first time in 33 years.

Although it is necessary to be cautious about the effects of speculation, the current land prices are believed to be based on actual demand. The ministry believes that "the economy is recovering slowly, and the overall upward trend continues."

Creating a 'Virtuous Economic Cycle'

A stable increase in land prices should stimulate personal consumption through the wealth effect. It should also support business activities promoting more efficient use of land. Japan should use rising land prices to create a virtuous economic cycle through higher wages and prices.

One of the reasons for the rise in land prices is reportedly the increase in the number of foreign visitors to Japan. Commercial districts in five prefectures, including Nagano and Miyazaki, saw land prices enter the growth track during 2024. And 34 prefectures in all saw positive growth. Thanks in part to the inbound effect, it appears the trend towards rising land prices, particularly in popular tourist destinations and downtown areas, is spreading to other regions as well.

*Grand Front Osaka's South Building has the highest price per square meter of commercial land in Osaka Prefecture. Kita-ku, Osaka (© Sankei by Miyako Nagumo)*

Strong housing demand is also pushing up land prices. There is a high growth rate in the central areas of the Tokyo and Osaka metropolitan areas. Moreover, the upward trend continues in regional areas with good transportation access. Commercial areas around train stations are increasingly being used for building condominiums and showing high rates of increase.

Commercial Development Shares the Spotlight

Land prices related to new semiconductor factories are also rising. With the resulting increase in employment, demand for land for factories, offices, housing, etc for affiliated companies will likely remain strong. Prices in Chitose City, Hokkaido, where Rapidus Corporation is building a next-generation semiconductors factory, have been particularly notable. Survey points in the city now rank among the top three commercial districts nationwide in terms of rate of land price increases.

*Rapidus' factory under construction in Chitose, Hokkaido, on January 16. (Photo provided by the company)*

There are concerns about the future, however. Rising material costs have led to skyrocketing home prices in some areas. This has impacted consumer purchasing power. Although the rate of increase has started slowing in regional core cities such as Sapporo, Sendai, and Fukuoka, the average housing cost has been rising faster than the national average.

Meanwhile, in Tokyo's 23 wards, the average price of a new apartment is over ¥100 million JPY ($668,000 USD). Consumer dissatisfaction may swell if homes in desired areas become less affordable. Therefore, close attention must be paid to future price trends.