All sources have been thoroughly verified for credibility. Furthermore, a local real estate expert has reviewed and approved the final article.
Yes, the analysis of Tokyo's property market is included in our pack
Ever thought of buying a nice property in Tokyo? You're not alone!
Many people are attracted to Tokyo's advanced technology and imagine owning a modern apartment or a traditional townhouse there.
Does it make sense, though? Are property prices increasing in Tokyo? What is the current trend? Is it better to invest in Shibuya or Shinjuku? Are there any hidden fees? Where are the best rental yields?
In this article, everything is sorted out for you.
The BambooRoutes team has really dug into this market. Actually, we've compiled all our findings in one pack. Get it now.
In this article, we're happy to share useful information with you.
How's the property market in Tokyo?
Are property prices rising or falling? Let's consult the most recent data and stats.
Types of properties
In Tokyo, you can find various types of properties for sale, including apartments, houses, condominiums, and even traditional Japanese-style homes.
Apartments are popular and come in different sizes, from cozy studios to spacious multi-bedroom units. Houses offer more space and often come with a small yard or garden. Condominiums provide a mix of privacy and shared facilities, while traditional Japanese-style homes showcase unique architecture and design.
Whether you're looking for modern convenience, suburban comfort, or a touch of cultural heritage, Tokyo offers a diverse range of properties to suit different preferences and lifestyles.
Should you buy or rent?
(If you're buying for yourself and not to rent out)
If Tokyo is your home or a place you're planning to relocate to, you may be contemplating the buy vs. rent decision in this dynamic capital city of Japan.
Obviously, it's better to buy if you are looking for an investment opportunity and a long-term commitment to a particular property in Tokyo.
To make a good decision, consider the property price-to-rent ratio. This metric shows the relationship between rental income and the cost of buying the property.
According to Numbeo, the property price-to-rent ratio in Tokyo is around 33.46, which is significantly above the world average.
This value shows that it would take you 33 long years of paying rents before you can own a property in Tokyo. However, if you rent for a long time, you won't own the property and won't save any money towards ownership.
Housing prices in Tokyo
On average, according to the last reported data from Ministry of Land, Infrastructure, Transport and Tourism, Japan, purchasing a property in Tokyo would cost you around $8,200 per square meter.
Obviously, there is a huge spread. A luxury penthouse in Ginza may have a higher price per square meter than an apartment in Shibuya. We actually give you a more detailed breakdown in our pack for buying property in Tokyo and in Japan.
To help you understand better, it is similar to the prices you can find in a city like Stockholm.
Also, housing prices in Tokyo are 29% cheaper than in Seoul.
The most expensive neighbourhoods in Tokyo are probably Minato, Chiyoda and Chuo, while the cheapest neighbourhoods are likely to be Edogawa, Katsushika and Adachi.
Trends
First and foremost, we have to acknowledge that Japan remains, today, a very stable country. The last Fragile State Index that has been reported for this place is 31.
This is important to remember when wondering if it's a good investment to buy a property in Tokyo.
Also, according to the International Monetary Fund, Japan's economy is expected to increase by 4.4% in the coming 5 years, resulting in an average GDP growth rate of 0.9% (it's not much).
If you're about to invest in real estate in Tokyo it's a good thing because, as the economy grows, people's incomes (usually) increase, motivating them to invest in real estate, which causes a rise in property demand and prices.
Also, in Japan, the average GDP per capita has changed by -0.3% over the last 5 years. It's an alarming number.
Finally, according to the information provided by the UBS Global Real Estate Bubble Index, the property market in Tokyo is currently expensive. The index stands at 1.56, and this indicates a potential risk of a housing bubble since a score above 1.5 is associated with bubble risk.
Looking for more updated data? We've done a big-picture study to find out if it's a good idea to purchase property in Japan right now.
Buying property in Tokyo
Buying real estate in Tokyo can be difficult due to the lack of reliable and up-to-date information available. That's why we have created the pack to buy property in Tokyo and in Japan.
Buying process
Inside our pack, we've outlined the complete buying process, including a detailed breakdown of prices and yields per area, tips for negotiating the price, and information about mortgage options.
Here, we're presenting you with a more straightforward version.
This is the step-by-step process to purchase a property in Tokyo:
- Determine your budget and property requirements, considering Tokyo's diverse neighborhoods.
- Engage a licensed real estate agent familiar with Tokyo's property market.
- Visit and inspect potential properties, paying attention to earthquake-resistant construction standards.
- Make an offer through your agent, using the "promise to purchase" (yachin meirei) form.
- Negotiate the price and terms, including the "earnest money" (soukin) deposit.
- Sign a sales contract (keiyaku), specifying details like the property boundaries and conditions.
- Pay a deposit (shikikin) of around 10% of the property price upon contract signing.
- Conduct due diligence, verifying property titles and past transactions with the "registry certificate" (koseki shouhon) and "land survey" (jūminhyō).
- Arrange financing if necessary, with a loan approval letter from a Japanese bank.
- Complete necessary paperwork with the local government, including the "property registration" (tōrokuseki).
- Finalize the mortgage loan if applicable, using the "mortgage certificate" (shichi jikken shoumeisho).
- Pay the remaining balance and fees at closing, including the "stamp duty" (inshi) and "real estate acquisition tax" (fudousan shutoku zei).
- Register the property in your name at the "Legal Affairs Bureau" (houmukyoku).
Also, if you're not from the country, you might want to check our article on how to buy property as a foreigner in Japan.
Make a profitable investment in Tokyo
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Where to find a property
Explore these websites to find properties in Tokyo, Japan:
- Housing Japan - Specializes in luxury real estate in Tokyo, offering services for buying, selling, managing, renting, and investing in prime areas.
- Wagaya Japan - Top-tier real estate information website specializing in rental and buying properties in Japan, catering to foreigners and offering a range of services and resources.
- Japan Home Finder - Find your new home in Tokyo.
- Japan Property - Leading real estate portal in Japan, offering a wide range of properties for sale and rent, catering to both domestic and international buyers and investors.
- Real Estate Japan - Provides comprehensive resources for buying, renting, and investing in properties across Japan.
Also, know that we have included contacts of real estate agencies, property lawyers, moving companies, expats communities and more in our pack for buying property in Japan.
Properties & Budget
As mentioned before, the average price per sqm in Tokyo is $8,200. A 1-bedroom property of 60 square meters would cost approximately $492,000, and a 2-bedroom property of 85 square meters would cost approximately $697,000.
However, prices will differ based on the attributes of the property and its specific location.
High-end property locations in Tokyo usually have higher price points. If you're considering Minato, a house might be around $1,550,000, but a condominium in Shibuya could be priced at $870,000.
Of course, some areas are cheaper. You might come across a property in Adachi for $380,000, or alternatively, find one in Itabashi priced at $310,000.
We give more details about property types and areas in our full pack for buying property in Japan.
Risks and pitfalls
Here are the main pitfalls when buying a property in Tokyo, Japan:
- "Tatami" Room Regulations: Properties with traditional tatami rooms may have strict usage rules and require costly replacements.
- Earthquake-Prone Area: Tokyo's seismic activity demands careful consideration of building safety and earthquake insurance.
- Land Rights: Understanding complex land rights (e.g., "Air rights" and "Surface rights") is crucial for high-rise properties.
- Fudosan Agents: Dealing with real estate agents (fudosan) may lead to potential language barriers and undisclosed fees.
- Building Age Limitations: Older properties may have a limited lifespan and face restrictions on renovation possibilities.
- "Key Money" Custom: Tenants can demand non-refundable "key money," affecting property profitability.
- Legal Restrictions: Certain areas impose ownership limitations due to proximity to military bases or protected zones.
- Cultural Considerations: Being respectful of neighborhood customs and local etiquette is essential to building good relationships.
We don't want this to happen to you, so we have included a full checklist for your property investment in our pack of documents. Avoid these mistakes and save a lot of money.
Everything you need to know is included in our Japan Property Pack
Living in Tokyo
Living in Tokyo is an exciting and unique experience, offering a vibrant city life and a wide variety of cultural and entertainment options.
Cost of living
The cost of living in Tokyo is generally high compared to other parts of Japan. Prices for basic necessities such as groceries, transportation, and housing are all more expensive than in other parts of the country.
Here are some examples to better understand the cost of living in Tokyo:
- Rent for a one-bedroom apartment in the city center: $1,500-$3,000 per month.
- Monthly utilities (electricity, water, heating): $150-$250 for a standard 85m² apartment.
- A meal at a mid-range restaurant: $10-$30 per person.
- Public transportation (train, subway): $1.50-$3 per ride.
- Groceries for a week (milk, bread, vegetables): $50-$100.
- Local beer (0.5L) at a pub: $5-$8.
- Fitness club membership: $60-$120 per month.
- Cinema ticket: $15-$20.
Neighbourhoods and spots
Since we want to help people easily understand, we made a table that tells about the neighborhoods in Tokyo. For yields, prices and rents, check our property pack.
| Neighborhood | Description | Strengths | Weaknesses |
|---|---|---|---|
Shinjuku | Shinjuku is a vibrant area with bustling streets, skyscrapers, and a variety of entertainment options. It's known for its lively nightlife and excellent shopping districts. | Numerous entertainment and dining choices, excellent public transportation, and a lively atmosphere. | Can be crowded and busy, high cost of living, and limited green spaces. |
Shibuya | Shibuya is a trendy neighborhood famous for its iconic crossing and youthful energy. It offers a wide range of fashion stores, cafes, and nightlife venues. | Youthful and energetic vibe, diverse shopping and dining options, well-connected to other parts of the city. | Can be overwhelming for some due to the large crowds, higher rent prices, and limited housing space. |
Ginza | Ginza is a luxurious shopping and entertainment district. It's renowned for its upscale boutiques, department stores, and fine dining establishments. | High-end shopping experiences, gourmet restaurants, and a sophisticated atmosphere. | Expensive cost of living, limited affordable housing, and can be less lively during non-business hours. |
Asakusa | Asakusa is a traditional neighborhood with historical landmarks like Senso-ji Temple. It offers a glimpse of old Tokyo with narrow streets and traditional festivals. | Rich cultural heritage, traditional architecture, and a wide range of street food and souvenir shops. | Can get crowded with tourists, limited modern amenities, and a quieter nightlife scene. |
Akihabara | Akihabara is famous for being a mecca for electronics, anime, and manga. It's a lively district with countless shops catering to geek culture. | Huge selection of electronics and anime merchandise, unique themed cafes, and a vibrant otaku culture. | Can be crowded and overwhelming, limited green spaces, and may not appeal to those uninterested in geek culture. |
Roppongi is a modern entertainment and nightlife district popular among expatriates and international visitors. It's known for its numerous bars, clubs, and art galleries. | Exciting nightlife, diverse international dining options, and a hub for contemporary art and culture. | Can be expensive, may feel less authentic compared to other neighborhoods, and some areas can be rowdy during late hours. | |
Ebisu is an upscale and fashionable neighborhood with a mix of commercial and residential areas. It offers a relaxed atmosphere with trendy shops and restaurants. | Charming and chic environment, excellent dining and drinking scene, and relatively less crowded compared to some other popular areas. | Can be pricey, limited historic attractions, and fewer public transportation options. | |
Harajuku | Harajuku is a vibrant and eclectic district known for its fashion-forward youth culture. Takeshita Street is a popular spot for trendy shops and street food. | Trendsetting fashion scene, unique boutiques, and lively atmosphere. | Can get extremely crowded, higher prices due to its popularity, and may not appeal to those seeking a quieter environment. |
Ueno | Ueno is a cultural and historical area with attractions like Ueno Park, museums, and a large market street. It offers a more relaxed and traditional atmosphere. | Abundance of cultural attractions, spacious Ueno Park, and affordable shopping options. | Some areas can be rough, fewer modern entertainment options, and limited upscale dining choices. |
Marunouchi | Marunouchi is a modern business district and the financial heart of Tokyo. It's home to many corporate headquarters, upscale shopping centers, and luxury hotels. | Efficient transportation hub, upscale shopping experiences, and a clean and organized environment. | Can be less lively outside of business hours, limited residential opportunities, and may feel too commercial for some. |
Ikebukuro | Ikebukuro is a bustling urban area with a mix of shopping, entertainment, and business centers. It's known for its large department stores and Sunshine City complex. | Diverse shopping options, extensive entertainment facilities, and good transportation connections. | Can be crowded and chaotic, fewer historic attractions, and may not offer a quiet living environment. |
Chiyoda | Chiyoda is the political center of Tokyo and Japan, hosting government buildings, the Imperial Palace, and historical sites like Yasukuni Shrine. | Cultural and historical significance, well-planned urban design, and a serene atmosphere around the Imperial Palace. | Limited residential opportunities, less vibrant nightlife, and can be quiet during non-business hours. |
Life in Tokyo
Tokyo is the economic hub of Japan and is home to the world's largest metropolitan economy. It is a major financial center and has a highly developed infrastructure, making it a prime destination for businesses and investors.
As per the IMF's data, the GDP of Tokyo makes up nearly 42% of Japan's GDP. Picking property in a well-off city is a wise move because of more jobs, high demand for homes, and property values that stay stable.
What expats usually like the most in Tokyo is the variety of dining options, from high-end Michelin-starred restaurants to casual izakayas, and the lively nightlife with its many bars and clubs. They also appreciate the convenience of the efficient public transportation system.
Another great point to note is that Tokyo is an incredibly safe city, with a crime index of only 24, which is a very impressive score. Tokyo's culture of respect for the law, strong community ties, and investment in public safety has created a low crime rate.
A good point for a property investor - Tokyo has an extensive mass rapid transit system consisting of 13 subway lines, 8 overground train lines, and numerous bus and tram routes.
Access to healthcare in Tokyo is more than excellent, with a Healthcare Index of 80. You probably know that when there's a solid healthcare setup, it makes a location more appealing, which benefits real estate.
Finally, it is worth noting that The University of Tokyo ranks among the top 50 universities in the world.
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Renting out in Tokyo
This section is for you if you're interested in purchasing property not for personal residence, but rather for the purpose of renting it out to generate rental income.
Long-term
Tenant Profiles in Tokyo
According to the data reported by Wikipedia, the home ownership rate in Japan is 55%, which is not much.
It means that, if you decide to buy and rent out in Tokyo, there will be a significant tenant pool. It's a good thing.
If you decide to buy and rent out to long-term tenants, you should target expats, young professionals, and families. For short-term tenants, you should target tourists and business travelers.
Here is a little summary table we've made for you.
| Property type and area | Profiles of potential tenants | What they are looking for | Expected monthly rent in $ |
|---|---|---|---|
Apartment in Shibuya | Young professionals, students | Urban lifestyle, convenience | $800 - $2,000 |
House in Setagaya | Families, expats | Suburban comfort, space | $1,000 - $3,000 |
Studio in Shinjuku | Students, singles | Central location, affordability | $500 - $1,200 |
Condo in Roppongi | Expats, young professionals | Nightlife, luxury living | $1,000 - $3,000 |
2-Bedroom Apartment in Meguro | Families, working professionals | Residential area, amenities | $1,000 - $2,500 |
High-rise Condo in Chiyoda | Urban dwellers, expats | Central living, city access | $1,000 - $2,500 |
1-Bedroom Apartment in Ikebukuro | Singles, young professionals | Entertainment, convenience | $600 - $1,500 |
Rental yields
As of today, rental yields in Tokyo are floating around 2 or 3%. It's low. A good rental yield is typically considered to be around 7% or higher.
The best rental yields in Tokyo typically come from smaller, older apartments located in less central areas, as they are often more affordable and have higher demand from tenants looking for good value. Additionally, properties located near train stations and other public transportation hubs tend to have higher rental yields due to their convenience and accessibility.
For further explanation and a more detailed breakdown, you can check the reports and analyses we have made.
Finally, be aware that rental incomes in Tokyo are taxed at 20%, which is rather good.
Short-term
You could also decide to rent short-term to tourists, business travelers, and people relocating to Tokyo. Additionally, students and interns coming to Tokyo for a short-term stay could be potential tenants.
If you decide to go with that option, look for properties in Shinjuku, Shibuya, Roppongi, and Ikebukuro, as these areas are popular among short-term tenants. As an added bonus, these areas have plenty of amenities and attractions nearby.
You will have some competition though - there are around 12,000 Airbnb listings in Tokyo. The average daily rate stands around $114.
You have the opportunity to generate a nice additional income stream then. Based on feedback from online testimonials and data analytics platforms such as AirDNA, Guesty, and Inside Airbnb, people who offer short-term rentals in Tokyo can make around $1700 per month. Also, the average occupancy rate is estimated at 81%.
Is it worth buying real estate in Tokyo then?
Buying a property in Tokyo is a significant decision that hinges on your long-term goals and financial situation. If you envision Tokyo as your permanent residence or are looking for a stable investment, purchasing property can be a wise choice. The city's property market has a history of stability, and anticipated economic growth could enhance property values.
Moreover, the high property price-to-rent ratios in Tokyo suggest that owning may offer better cost-effectiveness, especially if you plan to stay for an extended period.
However, if your stay in Tokyo is short-term, the substantial upfront costs associated with buying and selling property, coupled with potential language barriers and complex regulations, may outweigh the benefits of ownership.
Rental yields tend to be relatively low in Tokyo, making it less appealing for those seeking significant rental income. Additionally, the short-term rental market in Tokyo is highly competitive, making it challenging to generate substantial income through this avenue.
In summary, the decision to buy a property in Tokyo should align with your specific circumstances and objectives. It can be a prudent choice for long-term stability and investment but may not be ideal for short-term stays or those aiming for high rental yields. Careful consideration and thorough research are key when navigating Tokyo's property market.
Make sure you understand the real estate market in Tokyo
Don't rush into buying the wrong property in Japan. Sit, relax and read our guide to avoid costly mistakes and make the best investment possible.
The content provided here is for informational purposes only and does not imply endorsement or advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information, including text, images, links, or other elements in this material. Following the content and analyses presented here does not assure specific outcomes. For guidance tailored to your individual circumstances, it is recommended to consult with a professional, such as a lawyer, accountant, or business advisor.