Buying real estate in Japan?

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Is it a good time to buy a property in Japan in 2024?

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property market Japan

Everything you need to know is included in our Japan Property Pack

Are you thinking of investing in property in the land of the Rising Sun? Are you unsure if it's better to buy now or wait until next year?

Market timing is a subject where opinions vary among individuals. The Japanese chef you know may advise you that it's currently a good time to buy property, but your friend living in Osaka suggests waiting for a couple more months.

At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in Japan, we prioritize evidence-based work, relying on reliable data and statistics rather than personal opinions or rumors.

We have carefully gathered and analyzed official reports and government website statistics. Using this information, we have created a reliable database. Here's what we found that can help you decide whether it's a good time to buy real estate in Japan.

Enjoy the article!

How is the property market in Japan these days?

Japan remains, today, a very stable country


If you want to invest in real estate, prioritize stability as it is key for long-term growth and profitability. It is an information you need as a foreigner who might buy a property in Japan.

You most likely already know that Japan is widely known for its remarkable stability. The last Fragile State Index reported for this country is 31, which is an impressive number.

Japan's strong economic growth and low public debt have helped to create a stable economy, while its long-standing parliamentary democracy and strong rule of law have helped to ensure political stability. Additionally, Japan's cultural emphasis on harmony and consensus-building has helped to prevent social unrest and maintain social stability.

Stability check done. Now, it's time to review the economic forecast.

Japan will face challenges in its growth


Second thing to do before buying a property: make sure the country's economy is thriving.

As projected by the IMF, Japan will end 2023 with a growth rate of 1.3%, which is positive. Regarding 2024, we're talking 1%.

Unfortunately, moderate growth won't persist since Japan's economy is expected to increase by 4.4% during the next 5 years, resulting in an average GDP growth rate of 0.9%.

The minimal forecasted growth rate in Japan can be challenging for someone who wants to invest in property because it may be difficult to generate a return on investment due to the slow appreciation of the asset. Additionally, slow growth can make it difficult to predict the future value of the property, making it a risky investment.

However, GDP growth is not the only metric to look at.Japan gdp growth

Japanese business owners have a neutral outlook towards market conditions


While the GDP forecast is an informative metric, it may not fully reflect the local sentiment as it is based on external projections. Thankfully, in Japan there is an official metric that is frequently updated. This doesn't apply to every country, so we're in luck.

Surveys and assessments of business leaders form the basis for the Business Consumer Index (BCI), a metric that measures their confidence in the present and future economic conditions.

According to the Bank of Japan's data, the latest Business Confidence Index value is 4 for Japan. It is definitely a small score.

There hasn't been significant change, considering that the BCI score, 12 months ago, registered at -2.

A weak Business Confidence Index (BCI) score should not be automatically interpreted as a cause for alarm. It can simply reflect a temporary period of uncertainty or caution among businesses, which is a natural part of economic cycles. In fact, history has shown that periods of low BCI scores have often been followed by significant periods of growth, as businesses adapt, invest, and capitalize on new opportunities.

Property prices in Japan transition from stability to appreciation


Japan's home prices have increased by 21.4% in 5 years according to Ministry of Land, Infrastructure, Transport and Tourism, Japan.

It means that if you had bought a traditional ryokan in Kyoto for $1,000,000 five years ago, then it would now be worth around $1,214,000.

Recently, there has been a noticeable shift in the property market as prices are transitioning from a period of stability to a phase of appreciation

Certainly, it's a positive indication if you are considering purchasing a property in Israel. The market is dynamic and showing a growing momentum. However, you can still wait a bit and expect a market correction in order to secure a more favorable price for your investment.

You can find a more detailed analysis of the real estate prices in our property pack for Japan.Japan housing prices real estate

Everything you need to know is included in our Japan Property Pack

Japan's population is declining and getting poorer


Before you purchase real estate, take a moment to consider population growth and GDP per capita, because:

  • a growing population means more people needing homes
  • a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Japan, the average GDP per capita has changed by -0.3% over the last 5 years. It's an alarming number.

Rental yields are not really interesting in Japan


We will now consider the rental yields in detail.

It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Japan is purchased for ¥100,000,000 and generates ¥4,000,000 in annual rental income, the rental yield would be 4%.

According to Numbeo, rental properties in Japan offer gross rental yields ranging from 1.1% and 3.8%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Japan.

It's very minimal.

Japan rental yields

Everything you need to know is included in our Japan Property Pack

In Japan, inflation is projected to remain moderate


Inflation is when prices for things you buy keep going up.

It's when your favorite bowl of ramen costs 900 yen instead of 800 yen a couple of years ago.

If you're about to invest in a property, high inflation can benefit you:

  • property values tend to increase over time, leading to potential capital appreciation
  • inflation can result in higher rental rates, increasing cash flow from the property
  • inflation reduces the real value of debt, making mortgage payments more affordable
  • real estate can act as a hedge against inflation, preserving the value of the investment
  • diversifying into real estate provides stability during inflationary periods
  • tax advantages, like depreciation deductions, can help offset the impact of inflation

In accordance with IMF projections, the inflation rate in Japan will increase by 8.1% over the next 5 years, with an average annual increase of 1.6%.

This data is telling us that Japan might experience inflation soon, so it's worth thinking about buying property now.

Is it a good time to buy real estate in Japan then?

Now it's time to draw our conclusions.

Looking into 2024, purchasing property in Japan presents several reasons for consideration, based on a mix of positive and neutral factors. Japan's enduring stability provides a secure foundation for property investment. A stable environment minimizes risks and fosters investor confidence, creating an appealing atmosphere for real estate transactions.

Notably, Japan's property market is transitioning from stability to appreciation. This shift suggests potential for property values to rise, offering investors the opportunity for capital gains over time. Despite anticipated challenges in growth, the momentum of appreciating property prices could counterbalance these hurdles, making it an opportune time to enter the market.

While Japanese business owners hold a neutral outlook on market conditions, the nation's stable environment and appreciating property values could influence investor sentiment positively. On the other hand, average rental yields and projected moderate inflation may not be as enticing for immediate income seekers, indicating that property investment in Japan might be more geared toward long-term value appreciation.

Despite the negative signal of Japan's declining and relatively poorer population, the favorable and neutral indicators such as stability, transitioning property prices, and moderate inflation present compelling reasons to consider property investment in Japan in 2024. Careful evaluation of individual investment goals and risk tolerance is vital when weighing these factors for making well-informed decisions.

We genuinely hope this article has provided you with valuable insights and information.. If you need to know more, you can check our our pack of documents related to the real estate market in Japan.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Buying real estate in Japan can be risky

An increasing number of foreign investors are showing interest in Japan. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.

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