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Long-term rental investments in Japan's major cities offer varying returns depending on location and property type.
As of September 2025, investors can expect gross rental yields ranging from 2-3% in Kyoto to 6-8% in Fukuoka, with Tokyo and Osaka falling in between. However, net yields after all expenses typically run 30-45% lower than gross figures, making careful calculation essential for realistic ROI projections in 2026.
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Japan's long-term rental market offers diverse opportunities across major cities, with Fukuoka leading in gross yields at 6-8% while Tokyo provides stronger capital appreciation potential despite lower yields of 3.4-4.4%.
Foreign investors should expect net yields 30-45% lower than gross figures after accounting for management fees, taxes, and maintenance costs, with financing available at 1.3-2.5% interest rates for qualified buyers.
| City | Gross Yield Range | 1BR Monthly Rent (¥) | Price per sqm (¥) | Key Advantage |
|---|---|---|---|---|
| Tokyo | 3.4-4.4% | 120,000-160,000 | 1,100,000-1,500,000 | Capital appreciation |
| Osaka | 4.5-6.5% | 80,000-130,000 | 875,000 | Balanced yield & growth |
| Kyoto | 2-3% | 70,000-120,000 | 700,000-800,000 | Tourism demand |
| Fukuoka | 6-8% | 65,000-115,000 | 700,000 | Highest cash flow |
What are the current average rental yields for long-term apartments in Tokyo, Osaka, Kyoto and Fukuoka?
Rental yields in Japan's major cities vary significantly, with Fukuoka offering the highest returns and Kyoto the lowest for traditional long-term rentals.
Tokyo delivers gross rental yields averaging 3.4-4.4% in central wards, though some specific areas can reach 5.2%. The relatively lower yields reflect Tokyo's high property prices, which have been rising faster than rental rates. Central wards like Minato, Chiyoda, and Shibuya typically see yields on the lower end of this range due to premium pricing.
Osaka provides more attractive yields at 4.5-6.5% gross, with student areas and studio apartments sometimes reaching 7%. The city's lower property costs compared to Tokyo, combined with stable rental demand from its large business district and universities, create better cash flow opportunities for investors.
Kyoto shows the lowest yields at 2-3% for long-term rentals, though this changes dramatically for short-term tourist rentals which can reach 6-8% when legally permitted. The city's strict regulations on short-term rentals and high property values relative to long-term rental income create challenging returns for buy-and-hold investors.
Fukuoka leads national yield rankings with 6-8% average gross returns, driven by strong local demand and significantly lower property acquisition costs compared to other major cities.
How much do property prices per square meter vary between central wards and suburban areas in 2026 projections?
Property price variations between central and suburban areas show dramatic differences, particularly in Tokyo where location premiums can exceed 100%.
In Tokyo's central areas, new apartments typically cost ¥1,100,000-¥1,500,000 per square meter, with luxury properties in the "Big Five" wards (Minato, Chiyoda, Chuo, Shibuya, Bunkyo) exceeding ¥2 million per square meter. Suburban Tokyo areas price 20-30% lower, with typical 70-80 square meter units ranging ¥50-70 million total.
Osaka offers more affordable pricing at approximately ¥875,000 per square meter, representing 20-42% savings compared to Tokyo central areas. This price differential makes Osaka attractive for investors seeking better entry points while maintaining access to a major metropolitan market.
Fukuoka presents the best value proposition at around ¥700,000 per square meter, offering 36-53% savings compared to Tokyo's prime areas. Standard units typically cost ¥50-56 million, similar to Kyoto pricing levels.
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What are the typical monthly rental prices for a 1-bedroom, 2-bedroom, and 3-bedroom unit in those cities?
| City | 1-Bedroom (¥) | 2-Bedroom (¥) | 3-Bedroom (¥) |
|---|---|---|---|
| Tokyo | 120,000-160,000 | 170,000-240,000 | 220,000-300,000+ |
| Osaka | 80,000-130,000 | 100,000-180,000 | 130,000-200,000 |
| Kyoto | 70,000-120,000 | 100,000-160,000 | 140,000-200,000 |
| Fukuoka | 65,000-115,000 | 85,000-150,000 | 120,000-180,000 |
How high are average property management fees, maintenance costs, and association fees per year?
Property management and maintenance costs in Japan represent significant ongoing expenses that substantially impact net rental yields.
Property management fees typically run 5-6% of rental income, with Tokyo averaging around 5% and Kansai region cities like Osaka averaging 6%. For a ¥100,000 monthly rent, expect ¥5,000-¥6,000 monthly management fees.
Homeowners association (HOA) fees and repair reserves average ¥24,738 per month in Tokyo, breaking down to approximately ¥13,888 monthly for management and ¥11,708 for repair fund contributions. This totals roughly ¥297,000 annually for a standard apartment unit.
Additional maintenance costs including insurance and property taxes typically add ¥1,000-¥3,000 monthly, depending on the property size and location. These costs are generally unavoidable and must be factored into net yield calculations.
Combined, these fees can easily consume 15-20% of gross rental income before considering vacancy periods, major repairs, or income taxes.
What level of taxation applies to rental income in Japan, including national, local, and withholding tax?
Japanese rental income taxation involves multiple layers that significantly impact foreign investor returns.
National income tax applies progressive rates from 5% up to 45% (plus a 2.1% reconstruction surtax) based on net income after deducting eligible expenses like repairs, loan interest, management fees, and depreciation. Higher-income investors face substantial tax burdens on rental profits.
Non-resident foreign owners face 20.42% withholding tax automatically deducted by the rent payer or management company. This withholding can be credited against final tax obligations but requires proper documentation and annual filing.
Local "inhabitant" tax generally doesn't apply unless the investor lives in Japan for more than one year, though residency rules can be complex and should be verified with tax professionals.
Annual Japanese tax returns are mandatory for rental income, requiring detailed documentation of all income and expenses. Professional accounting support is highly recommended given the complexity of Japanese tax regulations and the need for proper Japanese-language filings.
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How does expected property appreciation or depreciation trend look across major Japanese cities in 2026?
Property appreciation trends vary significantly across Japan's major cities, with Tokyo leading growth while regional markets show more modest gains.
Tokyo property prices are growing 5-8% annually, substantially outpacing rental growth rates. This trend suggests continued yield compression as property values rise faster than rental income, benefiting capital appreciation investors but reducing cash flow yields.
Osaka, Fukuoka, and other regional cities show stable or gently rising property prices, with rental yields holding relatively firm. Regional capital flows and domestic investment are sustaining property values without the dramatic appreciation seen in Tokyo.
Kyoto benefits from strong tourism demand supporting property values, though longer-term non-tourist residential appreciation remains more muted compared to business-focused cities like Tokyo and Osaka.
Overall, Japan's property markets are experiencing modest inflation-driven appreciation, supported by low interest rates and steady domestic demand, though gains remain well below the dramatic increases seen in some other Asian markets.
What is the average occupancy rate for long-term rentals in each of the top markets, and how stable is tenant demand?
Occupancy rates and tenant demand stability show mixed results across Japan's major rental markets.
Tokyo faces market saturation with vacancy rates around 9%, reflecting the abundance of rental supply relative to demand. Despite this, lease durations average 2-3 years, providing reasonable stability once tenants are secured.
Osaka, Fukuoka, and Kyoto maintain healthier occupancy rates of 80-90%, with standard 2-year lease terms. These markets benefit from stable economic and demographic support, creating more consistent rental demand than Tokyo's oversupplied market.
Kyoto's short-term rental market achieves 80%+ occupancy in central tourist zones when legally operated, though this market faces ongoing regulatory restrictions that limit supply.
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How long does it typically take to secure tenants after listing, and what is the average lease duration?
Tenant acquisition timelines and lease terms follow relatively predictable patterns across Japan's rental markets.
Lease-up periods typically require 1-2 months to secure tenants after listing in urban apartment markets. High-demand areas with competitive pricing can achieve tenant placement within a few weeks, while properties in oversupplied markets or with premium pricing may take longer.
Standard lease durations are 2 years across all major markets, with renewal options commonly exercised. This provides reasonable cash flow predictability for investors, though tenant turnover costs must be factored into return calculations.
Short-term rentals operate under different timelines with daily and weekly bookings, but face significant regulatory restrictions that limit their viability in most Japanese markets.
Seasonal factors can affect timing, with spring (March-April) representing peak moving season due to Japan's academic and business calendar, while winter months typically see slower tenant activity.
What financing terms are available for foreign investors in Japan, including interest rates, loan-to-value ratios, and eligibility rules?
Foreign investor financing in Japan offers competitive rates but requires meeting strict eligibility criteria.
Interest rates currently range 1.3-2.5% for fixed-rate loans as of 2025, with floating rates typically tied to TORF plus 70-130 basis points. These rates reflect Japan's continued low interest rate environment, though they may rise with global monetary policy changes.
Loan-to-value ratios for qualified foreign investors typically range 50-70%, requiring substantial down payments of 30-50% of purchase price. Lower LTV ratios apply to non-resident investors compared to residents.
Eligibility requirements include proof of stable income, substantial deposits, and often Japanese residency or local guarantors. Banks evaluate foreign investors more conservatively, requiring extensive documentation of income sources and investment experience.
Most financing requires working with Japanese banks familiar with foreign investor lending, as international banks have limited presence in Japan's domestic property lending market.
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What are the legal and regulatory requirements for foreign landlords, including reporting obligations and tenant rights protections?
Foreign landlords in Japan face comprehensive legal requirements that mandate careful compliance and documentation.
The guarantor system requires most foreign landlords to secure Japanese guarantors (citizens or companies) for both property purchases and tenant relationships. This creates additional complexity and potential costs for international investors.
Annual income tax filing is mandatory for all rental income, requiring accurate record-keeping of all income, expenses, and tenant documentation. Professional accounting support is essential given Japanese tax complexity and language requirements.
Tenant protection laws strictly govern eviction procedures, deposit handling, and lease renewal terms. Discrimination against foreign tenants is illegal but occasionally occurs in practice, requiring landlords to work with management companies experienced in international tenant relations.
Short-term rental operations (Airbnb-style) require specific registration and compliance with local regulations that vary by municipality and often restrict operations significantly.
What are the risks of currency fluctuations on rental returns when converting yen into another currency?
Currency fluctuation represents a significant risk factor for foreign investors in Japanese real estate that can substantially impact total returns.
Yen depreciation against the investor's home currency can erode real returns even when property performance remains strong in yen terms. For example, a 10% yen decline can eliminate most rental yield benefits for foreign investors.
Conversely, yen appreciation can boost total returns even if property prices remain unchanged in yen terms, creating potential upside for currency movements.
Hedging tools including forward contracts, currency options, and yen-denominated borrowing can offset exchange rate risks, but these instruments add costs and complexity to investment structures.
Many sophisticated investors consider currency risk management as important as property selection when investing internationally, requiring ongoing monitoring and potential hedging adjustments.
How do the net yields compare once all costs—taxes, management, repairs, and financing—are deducted from gross rental yields?
Net rental yields after all expenses typically run 30-45% lower than gross yield figures, making realistic cost accounting essential for investment decisions.
Gross yields represent total annual rent divided by purchase price, but net yields deduct management fees, association costs, taxes, repairs, vacancy losses, and financing costs. This dramatically reduces actual investor returns.
For example, a property showing 5% gross yield might deliver only 3-3.5% net yield after all expenses. A ¥50 million property with 5-7% gross yield could provide 3-4% net returns once costs are properly accounted.
Major cost categories include management fees (5-6% of rent), HOA fees (¥200,000-300,000 annually), taxes (20-45% of net income), and vacancy allowances (typically 5-10% of gross income).
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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 long-term rental market offers diverse investment opportunities across major cities, with significant variations in yields, costs, and appreciation potential that require careful analysis before investment.
Foreign investors should prepare for complex regulatory requirements, substantial ongoing costs, and currency risks that can significantly impact net returns compared to gross yield projections.
Sources
- BambooRoutes - Average Rent Japan
- BambooRoutes - Average Apartment Rent Tokyo
- AseanUp - Top Real Estate Markets Japan
- Global Property Guide - Japan Rent Yields
- BambooRoutes - Average Rental Yield Osaka
- BambooRoutes - Average Rental Yield Kyoto
- Hokushin - Japan Land Price 2025
- BambooRoutes - How Much Apartment Japan
- Property Pilot Japan - Tax Information
- INA Group - Japan Real Estate Guide