Biases in commercial appraisal-based Property price indexes in Tokyo -Lessons from Japan experience in Bubble period-

This paper seeks to investigate the nature and magnitude of the distortion in appraisal land price information according to change in the market, with a special focus on the Government’s Published Land Prices. In Japan, there is an item of land price information, the so-called Koji-Chika (PLPS: Published Land Price Information System), that is a survey of fair market value by qualified appraisers. The valuation error of this land price information was analyzed using the following method. First, hedonic price indexes were constructed based on both actual transaction prices and the Published Land Prices, they were then compared to detect possible distortions in the governmental price information. The possibility of structural change in the Japanese real estate markets was also studied and its effect on price indexes was considered. Analysis of the Tokyo metropolitan area took place between 1975 and 1999. Large and systematic discrepancies between actual transaction prices and the Published Land Prices were identified, which might suggest that there are serious problems with the governmental information system. It is believed that it is necessary to consider this issue in the context of the entire real estate appraisal system in Japan