Excessive concentration of urban facilities in the downtown area of a city leads to external diseconomies and impedes the improvement of urban functions. A well-planned rearrangement of urban facilities (redevelopment) is needed in order to minimize such functional inefficiency. However, changes in the land use and expansion of road width causes land prices to increase rapidly. This paper reports the present situation of city redevelopment and attempts to clarify its influence on land price fluctuations, using the eastern area adjoining Sendai station. In this area, a land readjustment project, the first stage of a redevelopment plan, is proceeding and many changes in the land use can be observed. The results of the analysis are as follows:
1) The land readjustment project on the eastern side of Sendai station has two main purposes in addition to ameliorating housing conditions for local residents. One is to facilitate transportation between the central business district (CBD) in the western area to the station and the distribution centers located further east of the study area. The other is to expand the CBD toward the east. The project has steadily been attaining these objectives.
2) The area targeted for redevelopment consists of a total of 161.5ha, which is divided into three subareas. The project for the first subarea was started in 1960 and finished in 1984. Redevelopment of the second subarea took 18 years, 1973-1991. The last has been in progress since 1988 (Table 1), Much time is needed for the redevelopment of the area where many people lived and where land use was diverse. Changes in land use by private owners restricted during the project. The longer the project takes, the greater the number of old facilities remain.
3) During the project, the rise in land prices was kept at a low rate due to restraints on changes in land use. When the project was completed, however, the bright future prospects for the area caused land prices to skyrocket. These phenomena created regional differences in land price increases.
4) The Influence of the project can also be observed in the real estate market. After the project, the total selling price and the amount of sales of estates in the first two subareas increases rapidly compared with the situation before the project (Table 2 and Table 3). Prices of apartment houses, in particular, sharply reacted to the completion of the project and showed rapid increases.
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