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The Journal of Real Estate Finance and Economics

Erschienen in:

01.11.2007

Pricing Structure in Tokyo Metropolitan Land Markets and its Structural Changes: Pre-bubble, Bubble, and Post-bubble Periods

verfasst von: Chihiro Shimizu, Kiyohiko G. Nishimura

Erschienen in: The Journal of Real Estate Finance and Economics | Ausgabe 4/2007

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Abstract

In this paper, we estimate hedonic price equations of Japanese commercial and residential land prices for a 25-year period and to investigate possible structural changes in these price equations. Our price equations are based on transaction prices, not appraised land values, of commercial land in Central Business Districts of Tokyo (Chiyoda Ward, Chuo Ward, and Minato Ward), and residential land of its suburb (Setagaya Ward). We find that price structure differs substantially among locations, reflecting differences in supplier pricing and end-user preferences. We also find significant structural changes in price structure, identifying pre-bubble, bubble and post-bubble periods.

Vorheriger Artikel Trading Intensity and Real Estate Performance

Nächster Artikel Land as Production Input and Collateral: Land Investment by Japanese Firms

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Japanese property markets have been plagued by imperfect information and various institutional rigidities, which contributed greatly to instability of property prices. See Nishimura (1999) and Shimizu et al. (2004) for analysis of imperfect information on price behavior. Shimizu and Nishimura (2006) examine price information available in the market and find a large bias in it.

In Japan, the Ministry of Land, Infrastructure, and Transport publishes Land Price Statistics, and the Japan Real Estate Institute publishes an Urban Land Price Index. These are based on appraisal values. No comprehensive information based on market transaction price is available.

Many sales comparables lack important information, such as the total transaction price and building value, as we discuss later. Furthermore, building value estimates can vary significantly across appraisers.

Shimizu (2004) showed that the return rate of the questionnaire survey in Setagaya Ward was about 20%. (The sample included Part Ownership of Building)

They have argued the necessity for property information disclosure for a long time, suggesting that Japan should disclose transaction price to the market participants under a systematic arrangement, as in the USA, the UK, and Germany.

The data for this study was provided by the Ministry of Land, Traffic, and Infrastructure.

We found several cases with identical locations and transaction conditions yet different transaction land prices. This was due to differences in the estimated building value, as is explained later.

This issue is crucial for the creditability of the transaction data collected by the appraisers and should be tackled urgently by the authorities.

The Land Registration Notice has been digitized in each prefecture since 1987. We used data from the Tokyo Metropolitan Government office.

The reasons for these exclusions are that, first, we could not plot the locations on the map because the information was not sufficiently accurate, and second, we could not identify the transactions from the Land Registry Notice record. Because of these problems, we could not measure the distance to the station and CBD. Shimizu (2004) pointed out the inaccuracies in measured distances in the recorded transaction data.

Studies adopting Switching Regression Models in Urban Economics include Brueckner (1986) and McMillen (1994).

Garcia and Perron (1996) showed how to identify the changing points for two structural changes. Johan and Perron (1998) discussed the method of conducting a structural change test for unknown changing points of unknown frequencies. In our study, we used a simplified method for reasons of tractability.

We ignored possible structural change in their cross factors with railway dummies because preliminary investigation suggested that they did not have significant effects on regression analysis.

It is generally held that using the coefficient adjusted for the degrees of freedom to select the variables results in too many variables. In this study, the selection is made based on the AIC initially and then by Mallow’s CP to ensure the improvement of the model.

In property tax assessment, a bigger plot size is negatively adjusted in addition to the adjustment for depth.

The Tokyo Metropolitan Government showed that a great deal of residential land was converted to commercial land during the bubble period. After the boom, a lot of commercial land was converted back into residential use.

Amemiya, T. (1985). Advanced econometrics. Harvard University Press.

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Geltner, D., Graff, R., & Young, M. (1994). Random disaggregate error in commercial property: Evidence from the Russell–NCRIEF database. Journal of Real Estate Research, 19, 403–419.

Goodman, A. C., & Thibodeau, T. G. (2003). Housing market segmentation and hedonic prediction accuracy. Journal of Housing Economics, 12, 181–201.CrossRef

Hidano, N. (2003). The economic valuation of the environment and public policy: A hedonic approach. Northampton, MA: Edward Elgar.

Johan, B., & Perron, P. (1998). Estimating and testing linear models with multiple structural changes. Econometrica, 66(1), 47–78.CrossRef

McMillen, D. P. (1994). Vintage growth and population density: An empirical investigation. Journal of Urban Economics, 36, 333–352.CrossRef

Nishimura, K. G. (1999). Expectation heterogeneity and excessive price sensitivity in the land market. Japanese of Economic Review, 50, 27–44.

Ono, H., Takatsuji, H., Shimizu, C. (2004). Conjunct method of deriving a hedonic price index in a secondhand housing market with structural change. Reitaku Institute for Political Economics and Social Studies, Working Paper #18.

Quigley, J. M. (1995). A simple hybrid model for estimating real estate price indexes. Journal of Housing Economics, 4(1), 1–12.CrossRef

Shimizu, C. (2004). Fudosan shijo bunseki. Jutaku Shinpo-Sha.

Shimizu, C., & Nishimura, K. G. (2006). Biases in appraisal land price information: The case of Japan. Journal of Property Investment and Finance, 26(2), 150–175.

Shimizu, C., Nishimura, K. G., & Asami, Y. (2004). Search and vacancy costs in the Tokyo housing market: An attempt to measure social costs of imperfect information. Review Of Urban & Regional Development Studies, 16(3), 210–230.CrossRef

Smith, B. A., & Tesarek, W. P. (1991). House price and regional real estate cycles: Market adjustments in Houston. AREUEA Journal, 19(3), 397–416.

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Titel: Pricing Structure in Tokyo Metropolitan Land Markets and its Structural Changes: Pre-bubble, Bubble, and Post-bubble Periods
verfasst von: Chihiro Shimizu
Kiyohiko G. Nishimura
Publikationsdatum: 01.11.2007
Verlag: Springer US
Erschienen in: The Journal of Real Estate Finance and Economics / Ausgabe 4/2007
Print ISSN: 0895-5638
Elektronische ISSN: 1573-045X
DOI: https://doi.org/10.1007/s11146-007-9052-8

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