BEIJING, March 23 -- Land prices in Japan rose for the first time in 16 years as overseas and domestic investors competed to acquire properties in the country's three biggest cities.
Gains in Tokyo, Osaka and Nagoya compensated for a drop in regional areas, Bloomberg News reported.
Average commercial land prices in the three cities rose 8.9 percent and residential 2.8 percent in the year ending Dec. 31, the Ministry of Land, Infrastructure and Transport said in report released Thursday.
"Japan is becoming a country of cities, and those companies leveraged to urban real estate will do best," said Eric Starr, a Japanese stock portfolio manager at Connecticut-based Forest Investment Management LLC, which manages about 820 million U.S. dollars in assets.
"I see real estate as a multi-year trade in Japan."
Land values are still recovering from the collapse of an asset bubble at the start of the 1990s and the ensuing decade of declines.
Overseas investors continue to pour money into Japanese real estate, attracted by low interest rates, economic growth and new securitization deals.
The investment rush has sparked fears that a new land bubble may emerge in certain areas.
The Bank of Japan said in its Financial System Report last week that it was "necessary to carefully watch future developments in the real estate markets and their effect on the financial system."
Japanese interest rates are still the lowest among developed economies after the bank raised rates to 0.5 percent last month.
"The possibility of the Bank of Japan raising interest rates faster than the market expects has emerged with this data," said Yoji Otani, an analyst at Credit Suisse Securities Japan Ltd in Tokyo.
"The current phenomenon in land prices is becoming a problem. The BOJ has good evidence of that now."
Japan's increasing land prices are a reflection of the economy and don't indicate an asset bubble, Vice Finance Minister Hideto Fujii said after the figures were released at 4:50pm in Tokyo.
Commercial land in and around Tokyo, Osaka and Nagoya rose for a second straight year, after rising one percent in 2005.
Residential land prices in the cities increased for the first time in 16 years, up 2.8 percent.
The ministry's land report, based on appraisals of 30,000 locations across the country, is used as a benchmark for determining land values in the private and public sector.
Demand for office space in city centers and for condominiums in expensive districts pushed up prices, according to the ministry report.
(Source: Shanghai Daily)