The factors that determine land value are not limited to "location" and "size." Especially in urban areas, "floor area ratio" (FAR) significantly affects real estate prices. Lands with a high FAR can accommodate more floor area, thereby broadening their utilization and becoming a crucial factor in asset value. In this article, we will explain what floor area ratio is and how it impacts real estate prices.
1. What is Floor Area Ratio? Impact on Real Estate Prices
Floor area ratio refers to "the ratio of total floor area to the site area." The higher this value, the larger the building can be constructed, thus expanding its potential uses.
Example: Even with the same 100㎡ of land…
With a FAR of 200% → Total floor area of 200㎡ (capable of building a 2-3 story structure)
With a FAR of 400% → Total floor area of 400㎡ (capable of constructing high-rise apartments or office buildings)
As such, lands with a higher FAR can secure more floor area, which consequently affects real estate prices.
2. The Relationship Between Zoning and Floor Area Ratio
The floor area ratio and building coverage ratio (the ratio of building area to site area) differ based on the land's zoning classification. Even with the same size of land, the potential for utilization varies significantly between residential and commercial zones.
Zoning and Floor Area Ratio (FAR) in Japan:
Low-Rise Residential Areas (FAR 100-150%): Typically two-story houses in quiet neighborhoods.
Neighborhood Commercial Areas (FAR 200-300%): A mix of shops, offices, and mid-rise buildings (3-5 stories).
Commercial Areas (FAR 400-1300%): High-rise apartments and office buildings in business districts.
3. Utilizing Land with High Floor Area Ratio
Land with a high floor area ratio allows for larger building sizes, thus expanding utilization options. However, simply constructing a large building is not sufficient; it is essential to tailor the use to the area's characteristics and market needs.
Utilization Ideas:
✅ Residential Land: If there is leeway in the floor area ratio, consider building rental housing or multi-generational homes.
✅ Commercial Land: A mixed-use building with shops on the first floor and offices or residences above.
✅ Investment Real Estate: Design layouts according to rental demand (for singles, families, etc.).
However, maximizing the floor area ratio can lead to issues such as ensuring "sunlight, ventilation, and parking space," so balanced design is necessary.
4. How to Choose Real Estate Considering Floor Area Ratio
When purchasing land, it is crucial to be aware of not just the "size" but also the floor area ratio. Differences in FAR will affect the scale and use of the buildings that can be constructed, impacting future asset value.
Points to Consider:
✅ Check Zoning: Investigate whether the desired building can be constructed.
✅ Harmony with Surroundings: There may be height restrictions in residential areas.
✅ Consider Future Urban Planning Changes: Future regulatory changes may impact land value.
Conducting thorough research beforehand is essential to avoid regrets later about "having less construction freedom than expected."
5. Summary| Understanding Floor Area Ratio for Smart Real Estate Choices
The floor area ratio is a crucial indicator that determines land value and utilization options.
Lands with high FAR allow for diverse construction and affect real estate prices.
Building scale and use vary based on zoning classification, making careful verification important.
When choosing land, consider zoning, surrounding environment, and future urban planning.
When purchasing land, carefully check the floor area ratio and identify optimal utilization methods, as this is key to enhancing real estate value.
Note:
This article is intended for general informational purposes and does not recommend real estate investment or purchases. There are various risks associated with real estate utilization, so please consult with professionals and make your own informed decisions when considering investments or purchases.
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