Tokyo Real Estate Soars as City Edges Closer to Being Only for the Wealthy

Only households with an annual income of 20 million yen or more can purchase newly built condominiums in central Tokyo

The official land prices for 2025 have been announced. For the fourth consecutive year, land prices have risen nationwide, and condominium prices in Tokyo’s 23 wards and surrounding areas have also increased. In 10 of the 23 wards, residential land prices have risen by more than 10%. At this rate, only the wealthy will be able to live in Tokyo. Will housing prices continue to rise?

“Condominium prices will likely keep going up. In what are known as the six central wards — Chiyoda, Chuo, Minato, Bunkyo, Shinjuku, and Shibuya — it will be difficult to purchase a newly built condominium without a household income of at least 20 million yen.”

So says Masayuki Takahashi, Senior Chief Researcher in the Market Research Department of Tokyo Kantei, a company that provides real estate data to businesses.

A household income of 20 million yen! New condominiums continue to be built one after another in Tokyo — but are there really that many high-income earners?

“According to a survey by Mitsubishi UFJ Trust and Banking, around 20 to 40 percent of buyers of new condominiums in central Tokyo are people from overseas.

In the past, to avoid potential troubles arising from differences in language and customs, the proportion of foreign buyers was kept to about 10 percent, but now it seems that’s no longer being controlled,” says Mr. Takahashi. (The following quotes are also from him.)

According to Takahashi, the soaring condominium prices are mainly due to rising labor costs and the higher price of imported materials caused by currency fluctuations. Still, from the perspective of overseas investors, Japanese condominiums remain reasonably priced, making them a popular investment target.

In addition to these factors, the post-pandemic revival of commercial activity has increased the profitability of land, raising asset values and pushing land prices even higher.

Selling out in the first month is a thing of the past — nowadays, developers take several years, waiting for prices to rise before selling

However, in 2024, the “first-month contract rate” for newly built condominiums sold in the greater Tokyo area was 66.9%. Could it be that many units are left unsold?

“It’s not that they can’t sell — it’s that they don’t sell,” explains Takahashi. “In the past, if you saw a newly built condo with dark, unlit windows, people assumed it wasn’t popular. But that way of thinking is outdated. Now, with an upward price trend, units in the second and third sales phases fetch higher prices than those in the first.”

These days, developers aren’t aiming to sell out quickly. The prevailing strategy is to sell a portion before completion and hold the rest to release over several years. The old belief that “empty units will lose value” no longer applies.

“If you have the budget and find a property you want, it’s better to buy it right away.”

But why are developers focusing so much on luxury condos?

“Back when the population was growing, the business model was to target the mass market and sell in volume. But with a declining population ahead, chasing the mass market will only lead to diminishing returns. It’s more efficient to target wealthier buyers and sell expensive properties. It’s better to sell five ¥100 million units than ten ¥50 million ones — plus it helps raise the brand’s prestige.”

Going forward, even outside of the six central wards, higher-grade properties will emerge, and it may become difficult even for households with an annual income of ¥15 million to buy. “It’s no exaggeration to say that properties in central Tokyo aren’t even considering buyers with household incomes of ¥6 or 8 million.”

You might be able to afford an older, secondhand property — but there are risks too

What about secondhand condominiums?

“It depends on the area. In Chiyoda Ward, a 20-year-old, 70㎡ condominium might cost around 200 million yen. In popular residential areas like Ota, Setagaya, Suginami, and Nakano Wards, even secondhand properties won’t be that affordable.”

Even in the city center, if you widen the search to properties that are 30 to 40 years old, there’s a possibility that people with a reasonable income can afford them, says Takahashi. However, if the property is too old, it may fall under the old earthquake-resistance standards, and you might need to invest several hundred thousand yen for seismic retrofitting. If you’re okay with properties farther from the station, there might be properties in the range of 40 million to 50 million yen in Tokyo, but:

“If it’s far from the station, you’ll need to rely on buses, but there’s concern about the future. Due to driver shortages, there have been reductions in bus services and even route cancellations in some areas. I understand the temptation to jump at a bargain, but it’s something to be cautious about.”

The price of secondhand condominiums is expected to continue rising for a while. What about detached houses?

“Detached houses are less likely to be seen as investment properties, and their prices haven’t risen as dramatically as condominiums. In the past, it was thought that houses with land were more valuable, but now the asset value of condominiums has surpassed that of houses.”

Even in the city center, for small properties like three-story homes built on narrow plots of land, you might be able to buy them for around 80 million to 100 million yen, says Takahashi.

While the Trump tariffs may lead to a recession:

“If there’s a global recession and foreign capital withdraws, one might think Japanese real estate will become unsellable, but I don’t think that will happen. Right now, the real estate sector in China is struggling, and Chinese wealthy individuals are increasing their investments in Japan. Even in a recession, Japan’s political stability makes its real estate market attractive. The scenario where Japanese property prices continue to rise is definitely plausible.”

It might already be difficult to find a home in Tokyo. In fact, in areas like Chiba and Saitama, which are convenient for commuting to Tokyo, detached homes are selling well. If this continues, Japanese people may gradually leave Tokyo.

“According to the National Institute of Population and Social Security Research, Tokyo’s population is expected to keep growing for another 10 years. High-priced properties will continue to be sold, and Tokyo is becoming a city where only high-income earners can live. That’s the reality.”