The affordability and supply of new apartments remain issues for Tokyo's residential property market at the start of the new year, according to a new report.

Released on Monday, Japan Property Central's Market Report for 2019 highlighted the major trends for the country's real estate sectors throughout the past 12 months.

The report notes that in the six months from April to September, the average price of a brand-new apartment released for sale across greater Tokyo reached the highest level since 1991, while in terms of affordability, a new apartment in Tokyo’s 23 wards was around 13 times the annual average income.

This is almost double what it was in 2000 just below the peak of 18 times the annual average income during the asset bubble in 1990.

With prices remaining at high levels, JPC says some new projects are taking longer to sell than in the past.

"Developers, saddled with high development costs due to expensive labour, materials and land values, have little room to lower costs," it said.

"It seems likely that the price of new housing will continue to remain high."

The Parkhouse Nishiazabu Residence. Source: Plaza Homes

The report also acknowledges the shrinking supply of new apartments across the city, with the release of 24,846 units between January and November signalling a 16.3 per cent decrease from the previous year.

JPC said domestic buyers, who once would have only considered new construction, are increasingly turning their attention to the existing home market, with existing home sales exceeding new construction.

"In 2018, sales of existing apartments exceeded new construction for the third year in a row with 37,217 existing apartment sales and 37,132 brand-new apartment sales across greater Tokyo," it said.

"Since the vast majority of second-hand apartment sales go unreported, the actual difference is likely to be much higher.

"From January to November 2019, the monthly transactions of existing apartments in central Tokyo’s three wards of Chiyoda, Chuo and Minato were consistently higher than the 10-year average, in some cases between 25-55 per cent higher.

"Home loan interest rates remain low, with 10-year fixed-rate home loans ranging from around 0.57-0.86 per cent.

"Low-interest rates increase the borrowing capacity of homebuyers, supporting higher property prices."

Click here to view the full report.

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