Authored by the expert who managed and guided the team behind the Japan Property Pack
Everything you need to know before buying real estate is included in our Japan Property Pack
Are you considering investing in Japan's real estate market by 2025? Curious about the trends that could shape property values and opportunities? Wondering how economic shifts might impact your buying decision?
We will lay down recent insights, ici no guesswork, we rely only on solid data.
Actually, we know this market inside and out. We keep tabs on it regularly, and all our discoveries are reflected in the most recent version of the Japan Property Pack
1) Coastal properties will be scrutinized and devalued due to rising sea levels and climate change concerns
Coastal properties in Japan are under increased scrutiny due to rising sea levels and climate change concerns.
Over the years, global sea levels have risen significantly, with a notable increase of over 10 cm between 1993 and 2024. Japan is particularly affected, with sea levels projected to rise 5-10 cm more than the global average. This means that if you're considering buying a coastal property, you might want to think about how these changes could impact your investment.
It's not just the rising sea levels that are a concern. The frequency and severity of typhoons and coastal flooding have increased, leading to amplified storm surges in major bays like Tokyo and Osaka. These surges often exceed current design sea levels, which can lead to coastal erosion and saltwater intrusion into freshwater sources. This is something to keep in mind if you're eyeing a property near the coast.
Government reports, such as the G20 Climate Risk Atlas, highlight the economic risks Japan faces due to climate impacts. They predict a loss of around 3.72% of GDP by 2050, which includes the effects of sea level rise and fiercer weather. The national Basic Policy for Coastal Protection was revised to address these future changes, showing that the government is taking this threat seriously.
For potential buyers, it's crucial to understand that coastal properties might face devaluation as these environmental challenges continue to grow. The increased scrutiny on these properties is not just about the immediate risks but also about long-term sustainability and value.
So, if you're thinking about investing in a coastal property in Japan, it's essential to consider these factors. Rising sea levels and climate change are not just future concerns; they are already impacting property values and safety today.
Sources: Kato & Tajima, 2023, World Economic Forum, G20 Climate Risks
2) Tokyo rental yields will rise as more international students and expatriates move to the city
Rental yields in Tokyo are set to improve as the city draws more international students and expatriates.
Tokyo's universities, like the University of Tokyo, are seeing a surge in international student enrollment, especially from China. This trend highlights Tokyo's growing reputation as a top educational destination. With over 50 international schools offering various curriculums, the city is also becoming a magnet for international families.
The foreign population in Tokyo's 23 wards has increased by nearly 20% in the last five years. Central areas such as Chuo, Bunkyo, and Chiyoda are particularly popular among affluent expatriates seeking quality living and education. This influx is boosting the demand for rental properties in these neighborhoods.
Real estate reports from 2024 indicate a 5.9% year-on-year rise in average rents in Tokyo's 23 wards. Areas like Shinjuku and Minato, known for their high concentration of international residents, are experiencing significant rental price hikes, reflecting the strong demand for housing.
As Tokyo continues to attract a diverse international community, the rental market is poised for growth. The city's appeal lies in its blend of educational opportunities and vibrant expatriate life, making it a prime location for property investment.
Sources: Relocate Magazine, Japan Forward, Savills
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3) The weakening yen will attract more Asian investors to Japanese real estate
The weakening yen is making Japanese real estate a hot topic for foreign investors, especially those from Asia.
In 2023 and 2024, there was a noticeable uptick in foreign direct investment in Japan, with an impressive rise of 11.2 billion USD in September 2024. This surge shows that foreign investors are increasingly eyeing the Japanese market.
Looking back, whenever the yen has dipped, foreign investment in Japan's housing market has climbed. In the early 1990s, a weaker yen brought in a wave of foreign real estate investment. This historical trend suggests that the current yen situation might attract similar interest.
Right now, the exchange rate is quite favorable, with 100 Japanese yen being about 0.62 U.S. dollars in July 2024. This makes buying property in Japan more affordable for international buyers.
Adding to the appeal, Japan has no legal restrictions on foreign property ownership, making it easier for international investors to dive into the market.
With these factors in play, Japanese properties are becoming increasingly attractive to global investors, especially those from nearby Asian countries.
Sources: CEIC Data, Statista, Capital.com
4) Foreign buyers will target Japan's ski resort properties more, driving prices up in these areas
Japan's ski resorts are becoming a hot spot for foreign tourists, especially in places like Hakuba Valley.
With over 360,000 international skiers visiting annually, the area is a magnet for tourists from Australia, China, and Southeast Asia. This influx is not just about the slopes; it's about the whole package of safety, cleanliness, and the unique charm of Japan.
The Japanese government is actively promoting tourism, making the country even more appealing to foreign investors. This has sparked a growing interest in ski resort properties, which are seen as both secure and profitable investments.
Areas like Niseko and Hakuba are particularly attractive to foreign buyers looking for vacation homes or short-term rental opportunities. In Hakuba, the local property market is experiencing a building boom, a clear sign of strong demand from international investors.
For those considering a purchase, the potential for rental income is significant, especially during the peak ski season. The combination of stunning landscapes and a steady stream of tourists makes these properties a lucrative investment.
Foreign buyers are increasingly targeting these regions, driving up property prices and transforming the local real estate landscape. The trend is clear: Japan's ski resorts are not just for skiing anymore; they're a prime investment opportunity.
Sources: A Guide to Investing in Japan's Emerging Ski Resort Markets, Japan Hospitality - Ski Resorts, Guide to Buying Property in Hakuba Japan
5) Rents in Tokyo will rise due to its appeal to young professionals and international talent
Rents in Tokyo are climbing, and this trend is set to continue.
In 2024, the average rent in Tokyo's 23 wards saw a 4.1% jump from the previous quarter and a 5.2% increase compared to the previous year. This isn't just a blip; experts predict property prices in Tokyo will keep rising by about 5-6% annually in 2025. So, if you're thinking about buying property here, it's a good idea to act sooner rather than later.
One big reason for this rise is the influx of young professionals. A survey by Japan Youth found that over half of young people prefer city life, with Tokyo being a top pick. The city's vibrant lifestyle and endless entertainment options make it a magnet for this demographic, driving up demand for housing.
Tokyo isn't just attracting locals; it's also pulling in international talent. Companies like Yext, Inc. are setting up shop in the city, planning to hire 100 new employees by 2024. This kind of international business growth means more expatriates are looking for places to live, pushing rental demand even higher.
With Tokyo's appeal to both young professionals and international companies, the rental market is heating up. The city's dynamic environment and job opportunities make it a prime destination, ensuring that the demand for housing will keep growing.
Sources: Savills, Yext, Nippon.com, E-Housing
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6) Properties in Yokohama will increase in value as the city boosts its international business and cultural appeal
In 2023, property prices in Yokohama jumped by 42.5%, especially for new condos.
Yokohama is catching the eye of international investors, ranking third in fDi’s Global Cities of the Future for its FDI Strategy among large cities. This means the city is becoming a hot spot for foreign investments, which usually boosts the local economy and property values.
Adding to its charm, Yokohama opened the Tech Hub Yokohama in November 2024, a place buzzing with tech startups and innovation. This makes the city even more attractive for businesses and investors looking for a vibrant business environment.
The local government is all in, branding the city as “Innovation City Yokohama.” This initiative is a clear signal of their commitment to drawing in international businesses, which is great news for the local economy and property market.
Sources: Global Property Guide, Business Yokohama, Business Yokohama
7) International students will drive demand for student housing in major cities
Japan has seen a 20.8% increase in international students in 2023, totaling 279,274 students.
This surge includes a record number of students enrolling in Japanese language schools, showing a growing interest in studying in Japan. With the Japanese government aiming to host 400,000 international students by 2033, the demand for student housing is set to rise.
Major cities in Japan are already experiencing a shortage of student accommodation, and this is expected to worsen as more international students arrive. In areas with high student populations, rental prices are climbing, indicating a strong demand for housing that international students are willing to meet.
For those considering investing in property, this trend presents an opportunity. The influx of students means a consistent demand for housing, especially in cities like Tokyo and Osaka, where educational institutions are concentrated.
Investors might find it beneficial to focus on areas near universities and language schools, as these locations are likely to see the most significant demand. With the government's push for more international students, the need for housing will only grow.
Sources: Infinite News Desk, Ministry of Foreign Affairs of Japan, The PIE News
8) Younger generations will move to cities for jobs causing a demographic shift in urban areas
In Japan, younger generations are flocking to cities for better job opportunities.
With an urbanization rate of around 92.04% in 2023, Japan is far ahead of the global average, meaning most people already live in cities. This trend is not just about numbers; it's about the lifestyle and opportunities that urban areas offer. Cities are buzzing with life, and for young people, they promise a future filled with possibilities.
One big draw is the stable employment rate in urban areas. Even with a declining population, Japan's unemployment rate was a mere 2.6% in 2024, and it's expected to get even better. This kind of job security is a magnet for young folks. Plus, more women are joining the workforce, adding to the vibrant urban job market.
But it's not just about jobs. Cities are cultural hubs, offering everything from entertainment and dining to community activities. For young people, this means a richer, more engaging lifestyle. The presence of corporate headquarters and startups in these areas also means more job opportunities, which fuels economic growth and attracts even more young talent.
Urban life in Japan is not just about work; it's about a lifestyle that combines career opportunities with a vibrant social scene. This is why cities are so appealing to the younger crowd. They offer a mix of stability and excitement that is hard to find elsewhere.
Sources: Statista, Social DESA, OECD Employment Outlook 2024
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9) Japan's aging population will decrease demand for large suburban homes and increase interest in smaller properties
Japan's population is aging rapidly, with 36.25 million people aged 65 and older in 2024, making up a significant portion of the population.
This demographic shift is coupled with a record low fertility rate of 1.20 in 2023, leading to smaller family sizes and fewer large family homes being needed. Marriage rates have also dropped significantly, from 10 per 1000 people in 1970 to just 4.1 in 2022, further contributing to this trend.
Urbanization is on the rise, with more people moving to cities, which is causing a decline in suburban populations where large family homes are common. This shift is partly driven by older adults who prefer smaller, more manageable living spaces due to mobility issues and the desire for easier maintenance.
For many older adults, large homes are becoming a burden due to high maintenance costs and the physical demands of upkeep. This is leading to a growing interest in smaller, more accessible properties that are easier to manage.
As the population ages, the demand for large family homes in suburban areas is expected to decline, with a shift towards smaller, more practical living arrangements that cater to the needs of an aging population.
These changes in demographics and living preferences are reshaping the real estate market in Japan, with a focus on creating age-ready cities that accommodate the needs of older residents.
Sources: Kyodo News, Nippon.com, World Bank Blogs, East Asia Forum, AARP International
10) Government initiatives will boost property values in targeted urban renewal districts
Government initiatives to promote urban renewal often lead to increased property values in targeted districts.
When the government pours money into urban renewal, it usually means big changes. Take Japan's smart city investment program from 2023 to 2025, for instance. This program pumped funds into urban renewal, transforming areas by upgrading infrastructure, public facilities, and transportation. These improvements make neighborhoods more appealing to both residents and investors.
History shows that urban renewal can boost property values. Back in the 1980s, Japan's Urban Renaissance Policy sparked redevelopment in places like Shibuya and Shinagawa, and property values shot up. Fast forward to Tokyo in November 2023, and you'll see condominium prices surged by 42.5% compared to the previous year.
Urban renewal doesn't just stop at infrastructure; it also ramps up commercial activity. In areas like Shibuya and Shinagawa, there's been a boom in demand for mixed-use complexes. This uptick in business and commercial interest can further drive up property values as more people and companies flock to these revitalized spots.
These government-backed projects often create a ripple effect, attracting more businesses and residents. As these areas become more vibrant, property values tend to rise, making them a hot spot for potential buyers. It's like a cycle of growth that keeps feeding itself.
So, if you're considering buying property in these districts, keep an eye on government initiatives. They can be a strong indicator of future value increases, thanks to the improvements and increased activity they bring. Investing in such areas could be a smart move if you're looking for growth potential.
Sources: E-Housing Japan, ISOCARP, Global Property Guide, IoT M2M Council
11) Stricter short-term rental rules will reduce investment property profits in tourist areas
Stricter regulations on short-term rentals are shaking up the property market in tourist-heavy areas.
In Japan, the introduction of the Minpaku Law has made it tougher for property owners to rent out their spaces to tourists. This law requires hosts to register their properties and meet specific safety standards, which can be both time-consuming and costly. As a result, many property owners are finding it challenging to keep up.
The impact is clear: the number of short-term rental listings has dropped significantly. When the law first came into effect, there were 60,000 listings, but only 232 properties were officially registered. This steep decline is mainly because the process of compliance is complex and expensive, discouraging many from entering the market.
Adding to the pressure, property owners face the threat of hefty fines for non-compliance, which can reach up to ¥1,000,000. This has led some hosts to cancel bookings or even remove their properties from platforms like Airbnb. Investors are understandably worried, as surveys show concerns about potentially reduced income and profitability.
Real-life examples and media reports paint a vivid picture of the situation. Property owners are seeing their income shrink and are struggling to accommodate guests under the new rules. Many are shifting from short-term to long-term rentals, but this move isn't always as lucrative. The long-term rental market doesn't offer the same profit margins as short-term rentals, leaving investors in a tricky spot.
These changes are causing a ripple effect in the property investment landscape. Investors are adapting to the new regulatory environment, but the transition isn't smooth. The shift is evident, yet the profitability of long-term rentals remains a concern. Stricter regulations are reshaping the market, and property owners are feeling the pinch.
Sources: YourWelcome, Phys.org, E-Housing
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12) Japan's shrinking population will increase vacant homes in rural areas
Japan's shrinking population is causing more vacant homes, especially in rural areas.
In 2023, Japan saw a significant drop in birth rates for the eighth year in a row, which, along with an aging population, means fewer people are available to live in homes, particularly in less populated regions. This trend is leaving many houses empty.
In 2022, the population fell by over 800,000 people, and in 2023, the natural decrease, where deaths outnumber births, hit 831,872. This shift is a major reason for the growing number of vacant homes as there simply aren't enough people to fill them.
Young people in Japan are increasingly drawn to city life, which is making the situation worse. This urbanization trend is causing rural populations to shrink, leaving many homes unoccupied. The move to urban centers for better jobs and social services means rural areas have too many empty houses.
As young people flock to cities, rural areas are left with an oversupply of homes. This migration is driven by the search for better opportunities, leaving rural properties vacant and contributing to the increase in empty homes.
Sources: Nippon.com, East Asia Forum, Futuristspeaker.com
13) Remote work will boost demand for homes in rural areas like Hokkaido and Okinawa for more space and quality life
Remote work has transformed how we live and work, especially in Japan.
By 2023, over 66% of Japanese companies had adopted remote work, a huge leap from just a few years back. This shift is not just a trend; it's becoming the norm. People are craving a better work-life balance, and many are eyeing rural areas like Hokkaido and Okinawa for this change. These places offer more space and a slower pace, which is exactly what remote workers are looking for.
Even though the number of remote workers slightly dipped in 2023, the desire for flexible work setups remains strong. This is pushing more people to consider moving to the countryside. The demand for housing in these rural areas has skyrocketed, with an 80% increase in housing applications since the pandemic started. It's clear that urban dwellers are seeking the perks of rural life.
The Japanese government is also playing a part by boosting internet infrastructure in rural regions, making them even more attractive for remote work. This improvement is crucial because it allows people to work efficiently from anywhere. As a result, these areas are becoming hotspots for those wanting to escape the hustle and bustle of city life.
Hokkaido and Okinawa are particularly appealing due to their natural beauty and relaxed lifestyle. Imagine working with a view of lush landscapes or pristine beaches. It's no wonder people are drawn to these places. The rise of remote work is not just changing where we work but also how we live.
Sources: Jelper, Japan Times, Fannie Mae
14) Traditional Japanese homes will gain popularity as people seek unique culturally rich living experiences
There's a growing fascination with traditional Japanese homes, or "minka," as people crave unique and culturally rich living experiences.
Media buzz and social platforms are shining a spotlight on these architectural gems. Events like the Minka Summit have underscored their importance, especially with Japan's rising number of abandoned buildings. This has led to a wave of renovation projects, where folks buy and restore these homes, often turning a tidy profit along the way.
The Japanese government is also in on the action, pushing to preserve cultural heritage properties. With over 211,000 minka vacant but in good shape, there are plenty of initiatives to breathe new life into them. This aligns with a tourism trend where minka are being transformed into boutique hotels and short-term rentals, offering travelers a taste of traditional Japan.
Surveys reveal a strong desire for culturally rich living spaces, not just from foreigners but also from locals. This interest is evident in the rising enrollment in workshops on traditional building techniques, showing a keen interest in learning and preserving these skills. The real estate market is buzzing with demand for minka properties, with successful restorations often making headlines and boosting local communities.
Social media is a big player in this revival, with platforms like Instagram showcasing stunning minka makeovers. Architects and designers are teaming up to modernize these homes while keeping their cultural soul intact, making them a hit for those seeking distinctive living spaces. Reports of city dwellers moving to the countryside for a quieter life are adding fuel to this trend.
Sources: Outdoor Japan, Real Estate Japan, Japan Times, Repositum
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15) Compact energy-efficient homes will become popular as environmental concerns grow
Compact, energy-efficient homes are gaining popularity as environmental concerns rise.
In Japan, the trend is clear: over 82,000 new custom-built homes were Net Zero Energy Houses (ZEH) in 2023 and 2024. This means that 33.5% of new custom-built homes are now designed to be energy-efficient, a significant shift towards sustainability.
Government incentives are a big part of this change. The Japanese government offers subsidies, like JPY 1 million for households meeting ZEH criteria, making it easier for families and newlyweds to afford eco-friendly homes. These financial aids are encouraging more people to opt for sustainable living.
The smart home market in Japan is also booming, driven by a desire for sustainable living. From 2023 to 2029, this market is expected to grow significantly, showing a strong interest in connected and automated living spaces that focus on sustainability. This growth is fueled by advancements in smart appliances and IoT technology.
Major electronics manufacturers are leading the way with innovations that make homes smarter and more energy-efficient. This is not just about convenience; it's about creating homes that are better for the environment and more cost-effective in the long run.
Sources: Statista, Mordor Intelligence, E-Housing Japan
16) Osaka's waterfront areas will become highly sought after due to urban redevelopment and better flood defenses
Osaka's waterfront is becoming a hot spot thanks to major urban redevelopment and better flood defenses.
The Aqua Metropolis Osaka project is a game-changer, revamping the city's waterfront just in time for EXPO 2025 Osaka, Kansai. This project is not just about aesthetics; it's about making the area more appealing to both locals and tourists, enhancing the city's charm.
Meanwhile, the Umekita redevelopment project is turning the area around JR Osaka Station into a vibrant hub with lush parks, commercial spaces, and luxury hotels. This transformation is set to improve access to Kansai International Airport, positioning the area as a key gateway to western Japan.
Flood defenses are also getting a serious upgrade. The Yodo River's dykes and flood gates, which can handle a 1-in-200-year flood, are being reinforced. This ensures that the waterfront areas remain safe and resilient, even as sea levels rise.
These developments are making Osaka's waterfront increasingly attractive. The combination of urban renewal and robust flood defenses is drawing attention from potential property buyers who see the value in these improvements.
Sources: Kyodo News, Earth.org, Machigoto Expo
17) Nagoya property values will surge as it becomes a tech startup and innovation hub
Nagoya is gearing up for a surprising boost in property values as it transforms into a tech startup and innovation hub.
In recent years, the city has seen a 17.2% increase in tech-related job opportunities, especially in the information and communication sector. This surge is a clear sign of Nagoya's growing tech ecosystem, which is drawing in more professionals and businesses. The buzz around tech is palpable, with new startups popping up and established companies expanding their presence.
The Japanese government is also playing a big part by promoting smart technologies. They're offering subsidies and incentives for energy-efficient homes, which is boosting the smart home market in Nagoya. This market is expected to grow significantly, making the city a magnet for tech-savvy individuals and companies looking for cutting-edge living solutions.
Nagoya's local universities are teaming up with tech companies to support startups, creating a vibrant environment for innovation. They've set up a database of university-owned technology and equipment available for rent, which is a game-changer for small and medium-sized enterprises. This collaboration is not just about resources; it's about building a community where ideas can flourish.
These efforts are turning Nagoya into a tech hub, with a reputation that's attracting attention from all over. The city's strategic location and supportive ecosystem make it an ideal place for tech companies to set up shop. As more businesses and professionals flock to Nagoya, the demand for property is expected to rise, driving up values.
For anyone considering buying property in the country, Nagoya offers a unique opportunity. With its booming tech scene and government support, the city is poised for growth. It's not just about the numbers; it's about being part of a dynamic community that's shaping the future of technology and innovation.
Sources: Blackbox Japan, E-Housing Japan, Expat.com
This article gives you valuable insights, but remember, it’s not and will never be investment advice. We pull data from a range of sources to provide you with the most accurate picture possible, yet we can’t guarantee complete accuracy. Markets are difficult to predict. Make sure to do your own research and consult a professional before making any financial moves. Any risks or losses are your own responsibility.