Condo prices in Japan have fallen sharply since last year's earthquake with the average price of new condominiums in Tokyo falling by 7.2% to the year ending November 2011. However the prices of detached homes increased by 2.4% during the same period, and demand for homes has also moved from waterfront locations to safer, inland areas.
This is hardly surprising as last March the case of Japan was struck by a 9.0 magnitude earthquake, followed by a devastating tsunami which triggered a radiation leak in a power plant. Not surprisingly those who were able to leave the country afterwards chose to do so, with luxury sector of the rental market in Tokyo being particularly affected.
The financial damage caused by the earthquake was US$300 billion, but this huge cost has been exacerbated by the fact that the economy contracted by 0.4% last year, and Japan now has a large trade deficit which looks set to increase.
Japan is also trying to recover from a property bubble in the late 80s as between 1970 and 1980 land prices increased by 200%, and by 238.5% in the major cities. During the 80s prices increased by 103% nationally and by 272.2% in the major cities. The subsequent crash meant the banks ended up with loans of almost US$1 trillion.
However nowadays the country's financial system is in extremely good shape and interest rates are virtually zero. In spite of this there is little demand for loans and the ratio of home loans to GDP is just 24.5% which is substantially lower than in other developed countries, but there are signs that the housing market is beginning to recover, especially as investment has increased due to earthquake rebuilding with the number of bankruptcies within the property sector declining.
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