In 2023, the average price of new homes in Tokyo’s 23 wards was 114 million yen, a year-on-year increase of 39.4%. From January to April 2024, housing prices in Tokyo and Osaka rose by 1.5%, surpassing Singapore (1.3%) and New York (0.3%). In May 2024, second-hand housing prices in central Tokyo increased by 2.9% month-on-month.
Core Areas Lead the Rising Trend
In recent years, Tokyo’s housing prices have undergone significant changes driven by multiple favorable factors, gradually emerging from a slump and reaching record highs. The core areas of Tokyo, especially Chiyoda Ward, Chuo Ward, and Minato Ward (the three central wards of Tokyo), have always been highlights of Japan’s real estate market. These areas are not only the economic and political centers of Tokyo but also home to numerous corporate headquarters and financial institutions, making them a gathering place for Japan’s high-net-worth individuals.
In recent years, sales in the three central wards have rebounded. In 2021, driven by special pandemic-related demand, the transaction rate reached 7.4%. It slightly dropped to 6.5% in 2022 but rebounded to 7.0% in 2023 and reached a record high of 8.0% in 2024.
In March 2023, the average price of new apartments in the Tokyo metropolitan area reached 143.6 million yen. This was due to large-scale apartment projects in prime locations in the city center being sold at 10 million yen per tsubo (approximately 100 square meters for 300 million yen), becoming symbolic news of the market’s sharp rise.
After this news was released, high-rise apartments in the city center not only attracted actual buyers seeking to live there but also quickly drew “new investors,” including foreigners such as Chinese nationals, Japanese corporations, and wealthy individuals.
Tokyo Suburban Market Shows Signs of Weakness
In contrast to the strong performance of Tokyo’s core areas, the real estate market in Tokyo’s suburbs appears quite weak, showing a clear downward trend. Tokyo’s suburbs typically refer to areas within the metropolitan area but outside the city center, such as Kanagawa Prefecture, Saitama Prefecture, and Chiba Prefecture. In recent years, although these areas once attracted many homebuyers and investors, the current market conditions have raised concerns among industry insiders.
According to the latest data, the sales transaction rate in the suburbs of the metropolitan area has continued to decline, dropping from 11.6% in 2021 to 9.4% in 2022, further decreasing to 7.3% in 2023, and falling to 6.8% in 2024. This change indicates that demand in the suburban real estate market continues to shrink, especially against the backdrop of slowing economic growth and changing population dynamics, leading to a noticeable decline in consumers’ willingness to buy homes.
Additionally, although the inventory of homes in Tokyo’s suburbs increased by 38% over the past few years, the corresponding number of transactions decreased by 12%. This phenomenon further shows that despite the increase in supply, actual transactions have not grown in tandem, indicating a shrinking demand for suburban properties. In particular, areas far from the city center have limited appeal. Many potential buyers prefer homes closer to central Tokyo, seeking more convenient transportation, better educational resources, and improved living facilities.
Tokyo’s Core Areas Remain Investment Hotspots
Despite the relative weakness of the suburban market, Tokyo’s core areas continue to attract a large number of investors. As a global financial and cultural hub, Tokyo’s core areas are not only centers of business activity but also gathering places for high-net-worth individuals. These areas, with their convenient transportation, comprehensive living facilities, and relatively stable property values, remain a key focus for investors.
As of November 2024, the average expected selling price of second-hand apartments in Tokyo’s six core wards (Chiyoda Ward, Chuo Ward, Minato Ward, Shinjuku Ward, Bunkyo Ward, and Shibuya Ward) reached 140 million yen per 70 square meters, approximately 6.56 million RMB, a year-on-year increase of 29.7%. Among these, Minato Ward and Chiyoda Ward stood out, with prices reaching 190.28 million yen (approximately 8.83 million RMB) and 188.95 million yen (approximately 8.76 million RMB), respectively. Prices in these areas have approached or reached historical highs. The land price at 6-7-2 Ginza, Chuo Ward, Tokyo, has recovered to the peak of the bubble economy era, reaching 40.1 million yen per square meter, surpassing the previous peak of 38 million yen per square meter during the bubble economy.
For investors seeking stable returns, Japan’s real estate market, especially Tokyo’s core areas, remains highly attractive due to its low risk and high demand. Although the investment return rate in Tokyo’s core areas generally ranges from 3% to 6%, lower than some emerging markets, it remains a market worth watching for long-term investors seeking stable income.
Multiple Factors Drive Japan’s Real Estate Market Out of the Trough
The stability, low risk, and sustained high demand of Japan’s real estate market make it a top choice for international investors. As the world’s third-largest economy, Japan has mature economic policies and a stable market environment, providing a solid foundation for real estate investment. Against the backdrop of global economic fluctuations, the stability of Japan’s market stands out.
Japan’s low crime rate and high quality of life are also important factors attracting foreign investors. Japan’s social safety and security conditions rank among the best globally, providing a secure investment environment. At the same time, Japan’s urbanization continues to advance, especially in major cities like Tokyo and Osaka, where housing demand remains strong. In particular, the impact of an aging society has led to long-term growth in housing demand, further supporting the active real estate market.
Another significant advantage of Japan’s real estate market is its mature rental market. In cities like Tokyo and Osaka, the rental market is highly developed, with stable and relatively high rental yields. Compared to other countries, especially emerging markets, investing in Japanese real estate typically means lower risk and higher stability, making it particularly suitable for investors seeking long-term stable income.
Compared to other countries, Japan’s relatively relaxed tax policies are also a highlight of its real estate market. Japan’s real estate tax burden is lower than in many other countries, which helps improve investment returns, especially for long-term holdings. Overall, Japan’s real estate market, with its unique advantages, continues to attract a large number of international investors, particularly in core areas like Tokyo, making it a “hot cake” worth watching.
