Japan's Pace Of Deflation
For Land Prices Slows

Land prices in Japan continued to fall in 2005, but the pace of decline slowed for the third straight year and commercial-land prices in Tokyo and other big cities rose for the first time since 1990, in a sign that real-estate deflation is approaching an end, government data showed Thursday.

Overall land prices fell an average 2.8% last year, dropping for the 15th straight year, the Ministry of Land, Infrastructure and Transport said in its annual land-price report.

However, that was slower than a 5% fall in 2004 and a 6.2% drop in 2003, as land prices are showing signs of bottoming out or rising in some urban areas, according to the report.

In the Tokyo area, commercial-land prices rose an average 1% in 2005, the first rise in 15 years, the data showed. Commercial-land prices in Osaka rose 0.8%, while those in Nagoya rose 0.9%, also the first rise since 1990.

"What's clear now is the worst for land prices is over, but real estate is and will continue to be a location-related business with some areas more attractive than others," said Jon Tanaka, director at RREEF, the real-estate investment arm of Deutsche Bank.

Residential-land prices across Japan fell an average 2.7% in 2005, slower than a 4.6% drop in 2004 and a 5.7% fall in 2003, the report showed. Commercial-land prices also fell an average 2.7% last year, compared with a 5.6% decline in 2004 and a 7.4% decrease in 2003, according to the data.

"This report shows that land prices are stabilizing or rising in some urban areas, reflecting economic conditions and higher earnings expectations for some property developments," a ministry official said.

The ministry's report on land prices per square meter is measured as of Jan. 1 and is compiled annually. It serves as a benchmark for public and private land transactions and for government assessment of inheritance and property taxes. The latest report surveyed prices at 31,230 locations nationwide.

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