Japan Tightens Property Curbs to Cool Demand
As the population in Japan continues to fall, the government is considering tightening property curbs. The goal is to slow down the population decline and increase land use. The country’s high vacancy rate has been cited as a contributing factor to these measures. In addition, the country’s property tax is set at 1.4 percent of taxable base.
Inbound migration
Japan has a complex housing market, and the government is taking steps to cool demand. The country is battling an oversupply of houses. In some rural areas, population outflows have contributed to a decrease in house prices. Although these factors may not directly affect the price of housing, they could affect the long-term trend of regional housing prices.
Across Japan, population growth has remained relatively static since the late 1990s, although the number of rural prefectures has increased. In contrast, seven prefectures have experienced positive population growth in 2017, including Tokyo-to and the Greater Tokyo Metropolitan Area.
Population declines
The population of Japan is shrinking. While the country’s urban core has expanded in recent years, many rural regions are experiencing slow population growth. The country is also aging, leaving millions of vacant homes. This demographic change is forcing local governments to tighten property curbs in order to maintain a healthy housing market.
Population outflows from rural areas have caused an oversupply of houses. As a result, prices have not stabilized, even as the population declines. This exacerbates the housing market, which in turn affects local government finances.
House prices
The government of Japan has tightened property curbs to cool the housing market. Rising house prices have affected the quality of social spending in the country and are reducing tax revenue from housing transactions. They also may exacerbate the housing market by accelerating population outflows. The government will also increase taxes on residential and commercial property to cool demand.
The housing market in Japan plays an important role in household wealth. Housing-related liabilities account for 75 to 90 percent of all household liabilities, so declines in house prices can have significant consequences for household wealth. Moreover, falling house prices can affect banks’ and regional financial institutions’ balance sheets.
Housing tax
The vacancy rate of houses in Tokyo is below 1%, which indicates a high demand for houses. As a result, the government has tightened property curbs to cool the market. This move could have a negative effect on the local economy because it will reduce the amount of tax revenue from housing transactions. Moreover, it may lead to higher population outflows. This could have an adverse impact on the housing market and prices.
The government has also introduced additional buyer stamp duties of 5% to 15% for certain categories of buyers. The new measures may dampen prices and sales for the next quarter but may bounce back in the second half of this year.
Housing price appreciation after Abenomics
Abenomics, the new economic policy launched by Prime Minister Shinzo Abe, has benefited the real estate sector. The program combines fiscal stimulus, monetary easing, and structural reforms to help the Japanese economy grow. Although the plan has its critics, it has been very successful in lifting the property market. Since the beginning of the program, the Japanese housing market has become a safe haven.
The policy is expected to boost housing prices in the second half of 2015. It is also expected that Tokyo’s successful bid to host the 2020 Summer Olympics will boost property demand in the next seven years. Existing condominium and detached house sales have also increased in Japan, with an average rise of 5.3% and a 10.9% jump, respectively, from the first quarter to June 2015.
