2024/2/22 The closing price of the Nikkei Stock Average exceeded the closing price of 1989/12 of 38,915 yen 87 yen. There is also an opinion that real estate prices have also surpassed the bubble. As a generation that joined the bubble company, I remember feeling excited at the time, and while nostalgically remembering the completely different atmosphere from the present, I would like to compare current stock prices (which are said to have reached the same level) and real estate prices here.
First, there's the “stock price”.
The long-term prime rate at the time was 6.5%. The dollar to yen exchange rate was around 150 yen, and export companies earned foreign currency against the backdrop of the depreciation of the yen, making it “Japan as number one,” and everyone believed in a better tomorrow than today. High interest rates should have a negative impact on corporate profits and theoretical corporate value, but the average stock price-earnings ratio (ROE) at that time was about 60 times higher, which is 3 times higher than about 20 times the current one. It is a figure that cannot be reached without taking into account the growth rate of corporate profits (drastically). Meanwhile, so-called negative interest rates currently continue. Corporate profits are also doing well, mainly by export companies against the backdrop of the depreciation of the yen (around 150 yen), and there is an environment where stock prices can maintain a high level under low interest rates. It looks like a stock price level based on earnings (hard to say speculative).
Now it's ＜real estate＞.
Corporate profits in stock prices can be viewed as rent income in the case of real estate. Also, real estate prices are affected by rent fluctuation rates. Similar to stock prices, high interest rates are one of the factors that lower real estate prices, but during the bubble period, the rate of increase in rents (similar to corporate profits) was taken into account (drastically) and boosted real estate prices. In order to suppress this, a monitoring area system of the Land Use Planning Act was established in 1987, and guidance (so-called “total volume regulation”) for real estate loans by financial institutions was initiated in 1990, interest rates rose to the latter half of 8%, and then real estate prices continued to decline steadily until before the 2005 Lehman shock as a symbol of the burst of the bubble.
After the “financial easing in a different dimension” (so-called “Kuroda bazooka”) released under Abenomics around 2013 after the Lehman shock, real estate prices gradually began to rise until now. Looking at the changes in urban area prices during this period of about 35 years, even if the rise in prices is excluded from the bubble period to the present, it remained about 80% during the bubble period in residential areas nationwide and about 50% or less in the six major cities, and overall it has not reached the level of the bubble period. Recently, extremely expensive condominium prices in the center of the city have boosted average condominium prices, and voices exceeding the bubble can also be heard, but I wonder if the difference between “real estate” and “stock prices” is that it is a transaction that disregards some local profit rates.
Reprinted from “Weekly Building Management” by Building Management Institute Co., Ltd. (with permission)
