Japan: Risks Emerging from Real Estate?

From a new IMF report on Japan:

“Housing prices have been on the rise in some geographic areas and market segments, despite the declining population. Condominium prices have increased by 23 percent at the national level since 2013 (Figure 8). Historically low mortgage rates and recent changes in the inheritance tax are contributing to demand pressures, with little response in the number of new houses put on the market. Some overheating in the housing market is also indirectly suggested by house price-to-income ratios. Growth in real estate loans has been higher than other loans and the amount outstanding by domestic and Shinkin banks reached a record high at end-December 2016 (FSR, April 2017).”

 

JPN1

 

“Condominium prices appear to be moderately overvalued in Tokyo, Osaka, and several outer regions. While results should be interpreted with caution given data limitations and model uncertainty, an econometric analysis using city data shows that condominium prices in Tokyo and Osaka started exceeding values predicted by fundamentals in 2013, suggesting an overvaluation in the 15−20 percent range. A regional analysis also indicates that condominium prices may be moderately above their equilibrium values, with the degree of overvaluation in the 5−10 percent range (Figure 9).”

 

JPN2

Posted by at 9:22 AM

Labels: Housing

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