According to a leading real estate research organization, 40,166 new condominiums were put on sale in the Kanto region (Tokyo + the surrounding five prefectures) in 2008, which is about 30% less than the number put on sale in 2007. It was the first time in 16 years that the number of new condominiums dropped below 50,000 units. In addition, the portion of those actually sold was 64.1%, which is about 2.2 percentage points less than the contract rate in 2007. The analysis of this trend isn’t difficult to understand: the recession has put the bite not only on consumers’ buying habits, but also on developers’ ability to build new buildings. However, anyone who has been watching the condo market closely for the last ten years or so has to wonder if some other aspect isn’t being overlooked.Some of the organization’s statistics point to a bottoming out of the market’s decline. For instance, while the number of condos that went on sale in March alone was about 46% less than the number that went on sale in March of last year, the contract rate was 78.3%, which marks the first time in seven months that the rate has been above 70%. In addition, the inventory of unsold new condos as of the end of March stood at 8,846 units. It’s the first time that number has gone below 9,000 in several years.
If developers take this good news with a grain of salt, it’s probably because one statistic remains in the doldrums, and that’s the percentage of new condos that are sold on the day they go on sale, which is down to one percent. Though this seems a minor statistic, the organization takes it as an indication that there has been “no recovery” in the market so far. What worries them is the timing. March-April is the start of the fiscal year and, traditionally, the time in Japan when people buy residential property. People look all year for housing that fits their budgets and their living situations, and developers purposely wait until spring to put these units on sale (whether or not they are actually ready to be occupied–in most cases they aren’t). Once they do go on sale, buyers grab them up very quickly.
Some developers think that this 1% means that the units available are not in good locations or do not offer good “price performance.” But there may be another reason that doesn’t necessarily have anything to do with the recession. Maybe there are just too many condominiums. From what I’ve seen in the newspapers and on TV news shows, used condos have become more popular, both as investments and as places to live, but this particular research organization didn’t take that into consideration, mainly because developers, naturally, only care about new units. In any event, the population is dropping, as everyone knows, so any decrease in new condo sales has to be expected, recession or no recession.