Shortage in supply of new-built condominium pushes up demand in resale market

The sustainable growth of the Japan property market has been supported by a steadily growing population in the metropolitan areas. As such, the shortage in supply of new-built condominium is leading more people to turn their eyes towards relatively new condominiums in the resale market.

The Japanese traditionally favour new-built housing, but recent trends tell us that there has been a change in people’s perceptions towards the age of a building or property. In this report, we will look at more insights from the recent trend in the resale market.

 

Demand for housing remains strong

The population growth in metropolitan areas like Tokyo have been showing a steady increase. COVID-19 has changed our living and working styles in various ways, but the impact on housing demand is limited. Market observers commented that more people from the city central areas are moving to spacious houses in countryside when working from home (WFH) was being introduced during the state of emergency in April 2020. Indeed, according to the survey by Tokyo Shoko Research survey, 56% of companies adopted WFH at the time. However, in August, the number of companies who continued to WFH was reduced to 34.40%.

 

Survey on Working From Home 2020

 

Large companies have higher adoption rate of 61.31%, which is almost double that of mid-to-small size companies.

 

 

Participant Rate of Working From Home - Aug 2020

In terms of participant rate, majority of large companies responded that no more than 30% of their employees adopted WFH. Even so, majority of these employees WFH only partially, i.e. biweekly or a few days in a week. Therefore, relocating to countryside is not a practical option for the majority, as commuting to work is still required and thus good connectivity remains important.  

Looking at the demographic movement in Tokyo, COVID-19 did affect the population movements, but not to the extent to call it as a population outflow. Indeed, demography by nationality showed the decrease in population was largely contributed by foreign residents returning to their countries. As of August 1, Japanese population has increased by 58,114 comparing with January, while foreigner population has reduced by 4%.

 

 

In the long term, population growth is still in an upward trend.  If we look at the population growth oOn year –on- year basis, the Japanese population remains in healthy growing trend compared to last year. Therefore, the impact of COVID-19 on population growth is limited to the foreigners which attributes to a short-term factor and has not affected the long-term growth greatly.

Here I would like to highlight that in the long-term, population is growth has not been affected that much. Though there wasn't the regular April population growth due to state of emergency, but population is still in growth trend, so COVID-19 didn't hinder the population growth much. Y0Y basis, it is still in growing trend 

 

Fortunately, real estate sales activity has sprung back to what it used to be before COVID-19. There is still a great demand for condominiums from the local owner-occupiers and the decrease of foreigners do not seem to affect sales. When businesses resumed after the state of emergency, local buyers started actively looking for housing like before. On year-on-year basis, there were even more transactions in the resale market in August 2020.

 

Shortage of supply in new-built condominiums

In recent years, the supply of new-built condominiums in Tokyo has been decreasing, despite the growing population and housing demands. The choice limitations turned buyers to the resale market for secondary alternatives. Land acquisition has always been very competitive in the already developed central areas in Tokyo. As city urbanization continues, the shortage of supply in new-built properties is expected to push up the demands of resale apartments.

The next graph shows the transaction volume of resale versus new-built properties in Tokyo 23 wards over the past ten years. The transaction volumes of resale market showed a gradual increase, while the new-built condo supply slowed down after 2013.

Properties below 20 years are actively sought after

New-built housing has always been the most preferred option for Japanese, because historically, houses in Japan were built by wood. It was believed that the newer the house, the better would be its durability. However, the situations are different today. With fewer new-built options and the advancement of superior construction qualities, resale apartments are generally now more accepted.

As more buyers opt for resale markets as a substitute for new-built apartments, it resulted in most transaction volumes concentrated in the relatively new buildings with age below 20 years. In terms of the transaction ratio against the supply, the buildings aged between 6 to 10 years show the highest demand last year, followed by those of 11 to 15 years, 16 to 20 years and 0 to 5 years.

 

Recommendation is up to 15 years old

The observations showed that the highest transaction volume is for resale properties within 20 years old. Therefore, investing in property below 15 years is the best recommendation when we consider the exit timing as well. Although buildings of 20 years old may sound “old” for overseas investors, the locals feel differently. Traditionally, the Japanese adore new-built properties, but more people are now realizing that the construction qualities after the turn of the millennium have become excellent to provide strong durability. This is especially so for properties from established developers which are well-maintained in very good conditions, that makes  little difference when compared to the new-built ones.

Many Japanese developers have their own prestige brand names for their condominiums. Therefore, they put in their utmost efforts in maintaining their quality and reputation. Often, the building management is by developer’s subsidiary company so as an assurance that the same brand quality will be achieved.

Because of the superior construction quality, it is unlikely that owners of such condominiums will need to pay substantial amounts for maintenance in the first 10 years. That is why many property management companies offer guarantee plans that cover minor repair costs, as there is not much expense expected during that timeline.

After the first decade, some replacements of appliances like air-cons, dishwashers, water-heaters may be required due to service lifespans, but in general, the properties will look no inferior to new-built ones and are equally competitive in the markets.

 

Property price continues to grow in prime locations

Both resale and new-built condominiums in Tokyo have been on a steep price growth since 2013. The growth until 2016 were largely affected by the great expectations towards Tokyo Olympic game, which has brought significant impacts on the property markets not only in Tokyo central, but also to surrounding areas. The growth in the most recent years was due to more sustainable and rational factors. Good connectivity, prime locations, redevelopment and superior quality apartments are enjoying appreciation, whereas those properties without these factors are being left behind from the continuous growths.  

The demand for a good property in terms of quality and location is expected to remain strong in central area, as working in office is still a daily norm for majority. The shortage of new home supply will continue, as land acquisitions will remain competitive in prime locations, which in turn will push up values of the existing good properties. It is therefore a good opportunity to widen your options to consider resale properties with strong growth factors.

Back in 2013, almost any property near Tokyo could have price appreciation, but now, the real "good" property can continue to grow.  

 

 

For more details you may contact JLL International Residential at +65 9671 9583 or internationalresi@ap.jll.com

 

 

19 Nov 2020

This report provides a brief update on the UK Western Corridor Residential market including statistics on Reading, Maidenhead and Slough.

 

• Great opportunities for owner-occupiers, investors, renters and residential developers

• Attractive house prices and rents, especially compared with London

• Varied and enticing housing opportunities for local workers and London commuters

• A rich array of hi-tech, innovative businesses alongside more traditional business services organisations

• Excellent connectivity – rail, road and air

• Improving connections with Crossrail, due to become fully operational in 2022, making London employment hubs more accessible than ever

• The opportunity to be part of an exciting phase in the evolution of these towns

• Higher sales price and rental growth forecasts than the South East and UK

 

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22 May 2020

The greater certainty for the UK economy following the Conservatives’ resounding General Election win should lead to notable increases in house prices, transactions and housing starts across all regions of the UK.

 

The outlook for the UK property markets is more positive than it's been since before the 2016 EU referendum.

Last month's general election secured a stable Conservative majority for the next five years, bringing an end to the uncertainty that's characterized the UK economy for the last three years and restoring the confidence of investors.

With no further delays anticipated for Britain's departure from the European Union on January 31, 2020 is expected to be a year of gradual recovery as investors and businesses adjust to the new landscape.

This is set to accelerate from the end of the year as greater economic and political certainty instill.

Increases in consumer spending, government investment and wage growth above inflation are set to drive up house prices and new build activity across all UK regions.

For overseas property buyers, now is the opportune time to invest in the recovering UK residential market to enjoy the greatest returns.

The British Pound has shown signs of strengthening following the election result, while the economic fundamentals such as employment and real wage growth will help to underpin confidence.

 

UK residential forecast

Research by JLL forecasts moderate growth in the housing markets in 2020, leading to more rapid growth in the following years.

Average house prices are predicted to grow by one percent per annum in 2020, rising to four percent by 2022.

Transaction levels are expected to steadily improve to more than 1.3 million per year, with new housing starts taking slightly longer to recover as some developers remain cautious at first.

The UK rental sector will also see steady growth in the medium term, fueled by the trend for city living and more families waiting until their 30s to have children, delaying the purchase of their first home.

JLL predicts rental growth of 2 to 2.5 percent per year for the UK as a whole.

London weathered the years of uncertainty better than predicted and is set for a resurgence of economic growth over the next five years.

An expanding tech hub and top seven global city for talent, London attracts professionals and students from the world over, with population growth forecast at 100,000 every year.

 This means demand for well-connected property in London will continue to outstrip supply, but ongoing urban regeneration and an increase in new build activity will provide plenty of attractive opportunities for investors.

 

Fundamental certainties shaping housing delivery

Against this political situation, JLL has identified the fundamental certainties which will shape housing delivery in the coming years.

These certainties sit alongside our positive housing market forecasts for the next five years.

 

Here are the key certainties:

1.) Housing will remain a key item on the political agenda. Supporting first time buyer will be maintained and help to by will remain in place until at least 2023. High demand of affordable housing will continue for 1.1m people on wait list.

 

2.) Fundamental population changes will occur. Parents are having children later in life which is delaying the desire to purchase family-sized homes and supporting the growth of renting. Old population creates the need to deliver more elderly-appropriate housing, predict 25% of UK population will be over 65 by 2030.

 

3.) Towns and cities will be the highest housing demand. There will be an additional 2.5m people living in UK’s urban area by 2024.

 

4.) London will remain at the world’s top class. London is ranked by JLL’s Cities Research team among the seven established world cities. The UK Capital is particularly strong for its growth in digital sectors and its ability to nurture talent, there are more high-ranking universities in London than any other city in the world.

 

5.) There will be ever more connection between living and technology. There are 25% Britons without multiple smart devices in their homes. The thirst for technology will keep growing that means homes will accommodate ever more automated devices.

 

6.) Climate and social awareness will keep accelerating. All new homes will need to be Net Zero Carbon by 2030.

 

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03 Jan 2020

It is now more than three and half years since the EU Referendum and we are still living in a period of uncertainty. In fact, uncertainty has now become the new certainty.

The greater certainty for the UK economy following the Conservatives’ resounding General Election win should lead to notable increases in house prices, transactions and housing starts across all regions of the UK.

 

JLL’s Residential Forecasts will help you through this period of constant change offering valuable insight on:

- Brexit, domestic politics and the UK’s future economic performance

- House price growth, housebuilding and housing transactions

- Where developers and investors should focus their capital

- Policy shifts affecting First Time Buyers through to Seniors

- Changing housing preferences and the role of BTR/Multifamily

- How technology will change UK Living

- Climate crisis and its impact on UK Living

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19 Dec 2019

Why is it worth investing in condominiums in Berlin? What characterizes the real estate market? What does the city offer in terms of culture, education and infrastructure?

In our report "Why Berlin" you will learn everything about the German capital: information about the housing market, economic conditions, important industries and everything that makes everyday life worth living. Download our report now and let Berlin inspire you - as an investment or as a new centre of life in your new condominium.

 

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23 May 2019

The UK economic and political landscape has been dominated by Brexit over the past 2½ years. The next 2½ years are likely to be similar, albeit dealing with a different phase of the process.

Inevitably, the UK will collectively refocus attention on domestic policies as the sphere of influence from Brexit diminishes. And there are plenty of housing issues that need addressing – affordability, taxation, regulation in the private rental sector, affordable homes, housing supply, lack of skilled labour and digital construction are just some of the issues to address.

 

Highlights include:

• Loans to Build to Rent landlords have fallen 46% since the Brexit referendum and July 2018

• The UK is still far behind its target of 300,000 new homes a year by 2020, but delivery is speeding up

• Tech is likely to provide huge disruption over the next 5 years, with digital construction, building information modelling and smart tech all playing a role

• Central London house prices are forecast to grow at 15.3% over the next 5 years

 

And if you have any questions on this research or anything else that you'd like us to clarify, please feel free to get in touch with us directly at +6562203888

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13 Dec 2018

Despite several high-value transactions during Q3 2018, the Prime Central London sales market suffered a setback to its recovery during the quarter.

On average, prices fell marginally during Q3 having increased in the preceding two quarters and transaction volumes also slowed too. 

The lettings market benefited from a stronger quarter, if a little down on Q3 2017. Rental values increased across all price ranges while turnover experienced its usual Q3 boost. 

Looking forward, we expect a brighter future for both Prime Central London sales prices and rental values. We believe that some kind of Brexit deal will be agreed in the coming months which will remove a degree of uncertainty and instil much needed confidence into the Prime Central London market.

 

Key highlights include:

• Sales prices fall in Q3

• Transactions slowed further

• Rents rise in Q3

• Students bolster the market

 

 

If you have any questions on this research or anything else that you'd like us to clarify, please feel free to get in touch with us directly at +6562203888

 

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14 Dec 2018

With several new residential developments and the opening of the new Elizabeth Line, interest in West London is once again on the rise, following several years of East London domination.

While the opening of the Elizabeth Line (Crossrail) has been delayed, the new transport options will nevertheless change the face of West London, opening up new areas not only for commuters into the West End but also into the City and Canary Wharf.

It will continue to be the catalyst for development, especially in close proximity to Crossrail stations. Furthermore, some locations not renowned as commuter towns will be transformed by new residents. So expect West London to see a major makeover during the next decade. 

In addition to Crossrail, it looks like the Heathrow expansion will be given the green light, adding a third runway to the airport by 2026.

The expansion of Heathrow Airport will bring important revitalisation to some areas of West London, creating around 60,000 jobs and generating around £70bn in economic benefits by the 2050s. The new runway will increase capacity from 86m to 130m passengers a year. 

These large scale infrastructure projects will mark a new chapter for West London.

 

Highlights include:

• Acton has been a buzz of development activity in recent years, with 1,425 unit completions since 2014

• Brentford and Kew Bridge have the most units currently under construction in West London with 1,265 units underway

• Ealing will benefit from the opening of the Elizabeth Line and is currently at the top end of new build pricing in West London, with properties reaching up to £1000 psf. 

• Hayes & Harlington and Southall, positioned to the northeast of Heathrow, will benefit from the Elizabeth Line, with the area being host to the most extensive planning pipeline in West London

• West Drayton and Drayton Gardens, one of the westernmost villages in London, has seen significant residential development, with 1,141 completions over the past 5 years

• Uxbridge has seen a surge of residential development activity in recent years, with 628 units currently in the planning pipeline. 

 

 

If you have any questions on this research or anything else that you'd like us to clarify, please feel free to get in touch with us directly at +6562203888

 

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14 Dec 2018

Understanding the differences between property markets in the US, Europe and Asia Pacific is vital. So is understanding different countries’ sales processes and tax systems. That’s where we can help.

International property investment is not just about buying bricks and mortar; it can be about finding a home or making your money grow.

Choosing a property is only the beginning. We can also advise you about financing, legal documents, furnishing packages, and even find you a tenant.

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11 Mar 2020

The UK housing market is adjusting to varying levels of political and legislative change, but the 'New Housing Paradigm' is about a bigger, structural shift.

A supportive environment for capital flows into the housing market over recent years is expected to close. Digital construction will also play an increasingly important role in housing delivery. Our new report - JLL Forecasts: The new housing paradigm considers the impact of these changes on market performance over the next 5 years and looks at how the UK housing market is expected to perform in 2018 and beyond.

 

Key Highlights:
• More moderate UK house price growth for the next 5-10 years
• Brexit will remain a short-term drag on the UK housing market
• New Housing paradigm good for government, the economy, buyers, sellers and industry participants
• UK house price growth are set to ease
• UK transactions will improve at a moderate rate
• UK housing starts to remain buoyant

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20 Apr 2018