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Japan's property market shows strong performance in major cities while facing demographic challenges nationwide.
Property prices in Tokyo have surged 66% since 2020, with central areas commanding ¥1.1 million per square meter for new condos. Despite the country's aging population and forecasted 30% population decline by 2070, urban centers like Tokyo and Osaka continue to attract investment and maintain price growth momentum.If you want to go deeper, you can check our pack of documents related to the real estate market in Japan, based on reliable facts and data, not opinions or rumors.
Japan's property market presents a tale of two markets: thriving urban centers with strong price growth and declining rural areas with high vacancy rates.
Tokyo leads with the highest prices and growth, while demographic headwinds create long-term challenges for the overall housing market.
| Market Indicator | Current Status | Forecast Trend |
|---|---|---|
| Tokyo Condo Prices | ¥1.1M/m² (new), ¥819K/m² (used) | 5-6% annual growth |
| Osaka Condo Prices | ¥875K/m² (new), ¥477-707K/m² (used) | 4-5% annual growth |
| Rental Yields | Tokyo: 3.4%, Osaka: 4.5-6.5% | Gradual compression |
| Housing Construction | 800K units/year (2024) | Decline to 700K/year |
| Vacancy Rate | 14-16% nationwide | Rising, especially rural |
| Mortgage Rates | 0.7-1.3% | Gradual increase |
| Population Impact | Declining 0.5-0.7% annually | 30% decline by 2070 |
What are the current average prices per square meter for residential property in Tokyo, Osaka, and Kyoto?
Tokyo commands the highest residential property prices in Japan, with new condos averaging ¥1.1 million per square meter in central areas as of September 2025.
Used condos in Tokyo average around ¥819,000 per square meter, while the all-ward average sits at approximately ¥875,000 per square meter. Central districts like Shibuya, Shinjuku, and Chiyoda push prices well above these averages.
Osaka offers more affordable options with new condos averaging ¥875,000 per square meter citywide. Existing apartments range from ¥477,000 to ¥707,300 per square meter depending on the specific district, with central wards commanding premium prices.
Kyoto presents a middle ground with central apartment prices ranging from ¥585,000 to ¥615,000 per square meter. The ancient capital has seen steady price appreciation while remaining more accessible than Tokyo.
These price differentials reflect each city's economic importance, job market strength, and international appeal to investors and residents.
How have property prices changed in Japan over the past five years?
Japanese residential property prices experienced significant growth over the past five years, with nationwide increases averaging 20-40% across different property types.
Tokyo led the surge with new condo prices rising an extraordinary 66% between 2020 and 2025. The Tokyo metropolitan area house price index grew at 8-11.5% annually during recent years, far outpacing inflation and wage growth.
Osaka showed strong performance with new condo prices increasing 25-35% since 2020, while used condo prices climbed approximately 30% over the same period. This growth reflects Osaka's role as Japan's commercial hub and its appeal to both domestic and international buyers.
Kyoto maintained more moderate but consistent growth, with citywide apartment prices rising 4-5% annually since 2020. This steady appreciation reflects the city's cultural significance and tourism appeal.
Rural and regional areas tell a different story, with prices remaining flat or declining due to population outflows and limited economic opportunities. This creates a stark contrast between Japan's major metropolitan areas and its countryside.
What are the forecasted property price changes for the next one, three, and five years?
| Time Frame | Tokyo Market | Other Major Cities | Rural Areas |
|---|---|---|---|
| Next 1 Year (2026) | 5-6% growth (new condos), 3-4% (used) | 4-5% growth in Osaka/Kyoto | Flat to declining |
| Next 3 Years (2026-2028) | 4-6% annual growth | 3-5% annual growth | Continued decline |
| Next 5 Years (2026-2030) | 20-30% cumulative growth in central areas | 15-25% cumulative growth | 10-20% decline |
| Key Drivers | Foreign investment, limited supply | Economic growth, urbanization | Population decline, oversupply |
| Risk Factors | Interest rate increases | Economic slowdown | Accelerating demographics |
| Investment Outlook | Strong for premium locations | Positive for well-located properties | High risk, avoid investment |
| Market Maturity | Approaching peak in some areas | Growth phase continuing | Structural decline |
How many housing units will be built annually over the next five years compared to the past decade?
Japan's housing construction sector faces a significant slowdown reflecting the country's changing demographics and reduced demand for new homes.
During the 2010s, Japan typically constructed 790,000 to 850,000 new housing units annually. This construction activity supported economic growth and addressed replacement demand for aging housing stock.
As of 2024, annual housing starts dropped below 800,000 units for the first time in several years. This decline marks the beginning of a structural shift in Japan's construction industry.
Forecasts predict further decreases toward 700,000 housing units per year or potentially lower by the early 2030s. This represents a 12-15% reduction from historical levels and reflects shrinking household formation and population decline.
The construction decline will impact different regions unevenly, with rural areas seeing the steepest drops while major metropolitan areas maintain relatively stable building activity. It's something we develop in our Japan property pack.
What are the current rental yields in Tokyo and Osaka compared to other Asian cities?
Tokyo's rental market offers average gross yields ranging from 2.5% to 5.2%, with central areas averaging around 3.4% as of September 2025.
Osaka provides more attractive rental returns for investors, with average yields between 4.5% and 6.5%. High-demand areas and studio apartments can achieve yields of 6-7%, making Osaka more compelling for cashflow-focused investors than Tokyo.
Compared to other major Asian cities, Japan's yields are competitive. Seoul delivers yields averaging 2.7-2.9% for apartments, making Tokyo and Osaka more attractive. Singapore offers gross yields between 3.3-4.1%, positioning Osaka as clearly superior and Tokyo as comparable.
Hong Kong presents lower yields than both Japanese cities, with city center properties yielding only 2.3-3.2%. This makes Japan's major cities more attractive from a rental return perspective.
However, yield compression is occurring in Japan as property prices rise faster than rents, particularly in Tokyo's most desirable areas. Investors should factor this trend into long-term return calculations.
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How many foreign buyers purchased property in Japan last year and what was their market share?
Foreign investment in Japanese real estate reached record highs in 2024, though exact purchase numbers and market share percentages are not routinely published by government agencies.
Industry coverage consistently cites "record highs" for foreign buyer activity, with concentration heavily focused on Tokyo, Osaka, and Kyoto markets. International buyers show particular interest in luxury condos, investment properties, and vacation homes in resort areas.
Most estimates suggest foreign buyers represent less than 10% of the total residential market nationwide, but their impact is much higher in premium segments and central urban areas. In some luxury Tokyo districts, foreign buyers may account for 20-30% of transactions.
Chinese buyers traditionally dominated foreign investment, though diversification now includes buyers from Southeast Asia, Australia, Europe, and North America. Weak yen periods have particularly attracted international capital.
The Japanese government actively encourages foreign investment with no ownership restrictions and visa incentives for high-value real estate investors, contributing to sustained international interest.
What are current mortgage interest rates and how have they changed over three years?
Current average mortgage rates in Japan range from 0.7% to 1.3% for new 10-year fixed loans as of September 2025, representing historically low borrowing costs that support property market activity.
From 2022 to 2024, rates remained remarkably stable near 0.6-1.0%, reflecting the Bank of Japan's ultra-accommodative monetary policy. This period of rate stability supported significant property price appreciation by keeping financing costs minimal.
Recent Bank of Japan rate hikes began nudging mortgage averages upward in 2025, marking the end of the ultra-low rate era. However, increases remain modest compared to aggressive rate hikes seen in other developed markets.
Variable rate mortgages still offer extremely attractive terms, though fixed-rate products provide more certainty for long-term property investors. The rate environment continues to favor real estate investment over traditional savings vehicles.
Future rate increases are expected to be gradual, allowing the property market to adjust without triggering sharp price corrections. Rising rates may eventually cool price growth in some market segments.
How does Japan's population decline affect long-term housing demand?
Japan faces one of the world's most dramatic demographic transitions, with population projected to drop 30% by 2070, fundamentally reshaping long-term housing demand patterns.
The country currently loses 0.5-0.7% of its population annually through low birth rates and aging demographics. This translates to approximately 400,000-500,000 fewer residents each year, directly reducing housing demand over time.
Rural and suburban areas will experience the most severe impact, with some regions potentially losing 40-50% of their population by 2070. This demographic exodus will create massive oversupply situations and further depress property values outside major cities.
Urban centers like Tokyo, Osaka, and Kyoto will maintain relatively stronger demand through migration from declining areas, though they cannot escape the overall national trend. These cities may see their relative share of national population increase even as absolute numbers decline.
The aging population also changes housing needs, favoring accessible, smaller units near healthcare and services rather than traditional family homes. This shift will influence both new construction patterns and retrofit demands for existing properties. It's something we develop in our Japan property pack.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Japan versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What is the current residential vacancy rate nationwide and how do rural areas compare to urban centers?
Japan's nationwide residential vacancy rate reached an estimated 14-16% in 2025, representing approximately 9 million empty housing units across the country.
Rural areas face significantly higher vacancy rates exceeding 20%, with some depopulated regions approaching 25-30% vacant properties. These areas suffer from population outmigration, economic decline, and inheritance issues where heirs cannot maintain or sell rural properties.
Urban centers maintain much lower vacancy rates, with central Tokyo and Osaka areas reporting rates as low as 5-8%. Strong job markets, population inflows, and investment demand keep urban vacancy rates manageable despite overall national trends.
The vacancy problem compounds over time as abandoned properties deteriorate and become unmarketable. Local governments struggle with the costs of demolition and land remediation for properties with unclear ownership or financial liability.
This urban-rural divide in vacancy rates creates investment opportunities in cities while presenting significant risks for properties in declining areas. Investors should carefully evaluate local demographic trends before purchasing outside major metropolitan areas.
How do Tokyo office market trends look with vacancy rates and rental performance?
Tokyo's commercial office market shows mixed signals as of September 2025, with vacancy rates edging upward due to remote and hybrid work adoption following the pandemic.
Current vacancy rates have risen slowly, increasing by approximately 0.2-0.5 percentage points since 2023. While this represents a gradual uptick, rates have stabilized compared to their pandemic peak when many companies downsized office footprints.
Prime office rents face slight pressure from increased vacancy and new supply outpacing demand. However, premium locations in central Tokyo maintain stronger performance than secondary office districts or suburban markets.
New office construction continues adding supply to the market, creating competition for existing buildings. Landlords increasingly offer incentives such as rent-free periods or tenant improvement allowances to secure quality tenants.
The long-term office market outlook depends on how permanently remote work changes space needs. Companies are gravitating toward higher-quality, smaller spaces rather than traditional large floor plates, favoring modern buildings with amenities and flexible layouts.
How is the Japanese government supporting the property market through policies and incentives?
The Japanese government actively supports the property market through multiple tax incentives, subsidies, and regulatory reforms designed to encourage both domestic and foreign investment.
- Energy efficiency incentives: Tax credits and subsidies for Zero Energy Houses (ZEH) and energy-efficient renovations help reduce ownership costs while supporting environmental goals.
- First-time buyer support: Subsidies and mortgage interest deductions specifically target young families and first-time homebuyers to encourage homeownership among younger generations.
- Foreign investment facilitation: No restrictions on property ownership by foreigners, plus visa incentives for high-value real estate investors to attract international capital.
- Digital mortgage reforms: Streamlined approval processes and digital documentation reduce transaction costs and speed up property purchases, particularly in urban markets.
- Renovation over new construction: Government policies favor sustainable renovation of existing properties over new builds, aligning with national carbon reduction targets and addressing oversupply issues.
How does Japan's property affordability compare to the US and Europe using price-to-income ratios?
| Market | Price-to-Income Ratio | Affordability Assessment |
|---|---|---|
| Tokyo | 13-18x | Less affordable than most US cities |
| Major US Cities | 8-12x | More affordable than Tokyo |
| Paris | 15-20x | Similar to Tokyo |
| London | 15-20x | Similar to Tokyo |
| Hong Kong | 18-25x | Less affordable than Tokyo |
| Osaka | 8-10x | Similar to US major cities |
| Kyoto | 8-10x | More affordable than Tokyo |
Conclusion
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.
Japan's property market presents compelling opportunities in major cities despite demographic challenges.
Tokyo and Osaka continue to attract investment with solid fundamentals, while rural areas face structural decline that investors should avoid. It's something we develop in our Japan property pack.
Sources
- Average House Price Japan - BambooRoutes
- Monthly Real Estate Sales Report - RE/MAX Apex
- Kyoto Price Forecasts - BambooRoutes
- Japan Price History - Global Property Guide
- Japan Real Estate Market Trends - Tokyo Portfolio
- How Much Apartment Japan - BambooRoutes
- Japan Housing Starts Forecast - Statista
- Residential Construction in Japan - Statista
- Average Rental Yield Osaka - BambooRoutes
- Average Rent Japan - BambooRoutes