Tokyo's Housing Prices Topple 30 Year High

The price of new apartments in Tokyo toppled a 30-year-old record in 2021 as rising demand from dual-income households and increasing construction costs boosted the Japanese capital’s once-moribund housing market. The mean price of new condos in the Japanese capital and surrounding areas hit 62.6 million yen ($550,000) last year, topping the 61.2 million yen high watermark set in 1990 at the peak of the economic bubble, according to figures released Tuesday by the Real Estate Economic Institute. Some market watchers expect the surge to continue this year. 

“With a shortage of land and high construction costs, supply is not likely to jump anytime soon,” said Ryuta Hayakawa, a manager at Sumitomo Realty & Development Co. “Considering the demand, it’s unlikely that prices will fall.” 

Back Above the Bubble

Before Japan entered its prolonged economic slump, land prices were so high that Tokyo’s Imperial Palace was reputed to be worth more than all the land in California. Apartment prices collapsed in the wake of the bubble bursting, losing more than a third in value in just five years, and remained largely flat for the next two decades. But in the years since then-Prime Minister Shinzo Abe came to power in 2012, new apartment prices have surged. Abe’s fiscal stimulus, as well as the Bank of Japan’s unprecedented monetary easing, helped rekindle interest in the real estate market, with condo prices defying otherwise stagnant inflation to rise more than a third. 

The recent increase has also been fueled by pre-pandemic demand from overseas buyers, particularly from China, as well as greater interest in better living quarters as professionals spend more time at home due to Covid and a recent dearth of supply. Real estate is running hotter than other assets in Japan. The nation’s stock market has yet to reclaim its bubble-era highs, though benchmarks did touch 30-year records last year. More than 600 apartments at Harumi Flag, a real estate development that housed athletes and delegations during the Tokyo Olympic Games last year, sold out the day they went on sale. Responding to the demand, the government plans to trim tax breaks for homeowners from next year. 

Despite Tokyo’s expensive reputation, the decades of stagnation combined with the relatively easy availability of 35-year mortgages at ultra-low interest rates, means city-center apartments remain within the reach of working professional couples, unlike those in many other large cities around the world. The rise of high-earning, dual-income households as more women enter the workforce has also been cited among the reasons for rising property prices in urban regions. Co-working couples now make up more than two-thirds of all households, a 180-degree reversal of the trend during the bubble era. 

Power Couples

Tokyo condo prices have been boosted by a jump in dual-income households. Media have dubbed the phenomenon as “power couples,” with Naoko Kuga of NLI Research Institute defining them as those in which each partner earns more than 7 million yen. “While the overall number of ‘power couples’ is small, their willingness to spend is strong, and their impact on the consumer market cannot be ignored,” she wrote in a report this month. Developers are also seeing extremely high interest for luxury apartments, according to Sumitomo Realty’s Hayakawa. Demand for these condos, which cost more than 200 million yen and have sizes of over 100 square meters (1,076 square feet), is rising not just in the Tokyo region, but also in cities such as Osaka and Sapporo in Hokkaido, he said. 

(Source: Bloomberg | Pic: Tokyo, Janusz’s Rumpelkiste)

Related Articles

General
Information, News
Foreign companies and individuals in China and Hong Kong are targeting Japan’s real estate, including areas of forest and land with access to water resources in the Kyushu region, prompting concerns from local governments and residents.
General, Investors/Business
News
With growth slowing, demographics depressed and the trade balance in deep deficit, Tokyo wants to incubate startups and put more state money into cutting-edge sectors like semiconductors and next-generation telecommunications. Prime Minister Fumio Kishida says he will put innovation and scientific research at the “centre” of his policy push. Perhaps it shouldn’t be.
General
News
The Japanese government relaxed coronavirus border restrictions in March this year, but after almost two years of severely limited entry, "there needs to be a concerted effort to restore Japan's image and lure back all the (international) talent that has been lost," one expert told the Mainichi Shimbun.
General, Investors/Business
News
Japan’s work culture is in many ways a legacy of decades past, a time when most women got married, quit their jobs and raised a family, while their husbands became the sole breadwinner with long work hours. Unfortunately, raising a family and caring for elderly family members has stereotyped women as the lesser valued gender in the eyes of an employer. The coronavirus is giving this inequality a shake-up...