Residential prices in Tokyo hit an all-time high

Demand for multi-family real estate sector on the rise  

Japan is very compelling because of the stability of the rents and the market’s liquidity, especially in Tokyo. Imagepocket/Shutterstock

According to Bloomberg, the growing cost of construction and the rising demand from two-earner households have propelled new apartment prices in Tokyo, making history as it surpassed a 30-year-old record in 2021. 

Figures published by the Real Estate Economic Institute revealed that the median price of new apartments in the capital city and its neighbouring areas reached JPY62.6 million (USD550,000) last year, exceeding the JPY61.2 million benchmark set at the height of the economic bubble in 1990. 

Industry analysts believe that the price hike will continue in 2022. 

Sumitomo Realty & Development Co. Manager Ryuta Hayakawa said: “With a shortage of land and high construction costs, supply is not likely to jump anytime soon. Considering the demand, it’s unlikely that prices will fall.” 

In August 2021, Asian fund managers and investors shared their plans to grow their multi-family assets in Japan, reported Asian Investor. 

Among them is Allianz Real Estate, which has a growing portfolio worth USD1.5 billion in the country. Rushabh Desai, the chief executive officer of Asia Pacific business at Allianz Real Estate, said the country’s residential real estate market “offers an attractive long-term stabilised cash yield.” 

Seoul-based Igis Asset Management has also been on the lookout for investment opportunities between USD50 million and USD200 million in Japan’s multi-family sector. 

“[Japan] is very compelling because of the stability of the rents and the market’s liquidity, especially in Tokyo. We would like to come back to [the market] when travel conditions improve,” said the co-chief executive and president, Joseph Lee. 

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The Real Estate Outlook 2022 report published by Savills Investment Management project continued resilience for Japanese multi-family homes, particularly in major metropolitan areas that offer lifestyle options and employment prospects. 

“We anticipate the multifamily sector in 2022 will see a distinct uptick in leasing activity due to latent demand among individual residents and corporates as recruitment and workplace strategies begin to normalise,” the report stated. 

As for homebuyers, Bloomberg added that Tokyo has always had a reputation of being an expensive city, yet decades of stagnancy, along with easy access to 35-year mortgages at extremely low-interest rates, have enabled working professional couples to afford apartments in city-centres compared to other major cities around the globe. 

The growing number of high-earning individuals in dual-income households have caused the surging property prices in urban locations, seeing as these couples account for two-thirds of all households, a complete reversal of the 90s full-time housewives trend. 

The Property Report editors wrote this article. For more information, email: [email protected].