Tokyo Condominium Market Forecast 2020: Where are supply and sale prices headed?

The Real Estate Economic Institute (REEI) has released a cautiously optimistic 2020 forecast for supply and price trends in the new condominium market for the greater Tokyo area, which includes Tokyo and the prefectures of Kanagawa, Chiba, and Saitama.

Below are the key takeaways from the forecast.

Supply in Tokyo 23 Wards forecast to increase slightly – Sales to remain strong

  • The institute forecasts that about 32,000 new condominiums will hit the market in 2020, a year-on-year increase of 2.2%.
  • Supply will likely increase in all areas of greater Tokyo, except for Saitama Prefecture.
  • For the full 2019 calendar year, the number of new units expected to be put on the market will reach about 31,300, a year-on-year decrease of 15.7%. This was primarily due to cautiousness related to the October 1st consumption tax increase.
  • Sales are expected to remain strong in 2020, especially for higher-end apartments, though the purchase-cycle may lengthen.
  • Negative effects from the consumption tax increase are seen to be limited. The major condominium developers continue to have an optimistic long-term market outlook, though they remain cautious in the mid-term.

“Tower mansions” to continue to take the lead – Eyes will be on the Tokyo Bay Area

  • To start 2020, in the Tokyo 23 Wards “tower mansions” (high-rise tower condominium buildings) will be the most anticipated releases. In the suburbs, very large-scale developments are expected to draw buyer interest.
  • In the spring of 2020, a number of large-scale multi-use developments near major stations are expected to be released for sale.
  • In the Tokyo 23 Wards, about 14,000 newly built condominium units will be put on the market in 2020, a year-on-year increase of 1.4%.
  • The market will be closely watching new properties in the Tokyo Bay Area and the neighborhood near the soon-to-be-opened Takanawa Gateway Station.
  • The Tokyo western suburbs are expected to get 3,000 new units, a year-on-year increase of 15.4%; Kanagawa will see about 7,500 new units; and Chiba about 3,500.

Inventory forecast to increase

  • Currently, the total stock of new condominiums has reached the 7,000-unit level.
  • Construction starts from January to October 2019 increased 17.9% year-on-year (51,628-units), with total inventory hitting 7,525 units as of the end of November, a year-on-year increase of 11.5%. By the end of 2020, total inventory could reach the 9,000-unit level.

Average sales prices by region

  • The average sales price for a newly constructed apartment in the greater Tokyo area, as a whole (from January to November 2019) was ¥60,060,000 ($549,000USD). This was a year-on-year increase of 2.4% and the second time that prices have hit the 60-million yen mark (the first was in 1990).
  • Tokyo 23 Wards: Average sales price ¥72,470,000, up 1.5% YoY;  ¥1,113,00 per sqm, down 0.7% YoY
  • Tokyo Western Suburbs: Average sales price ¥57,040,000, up 9.0% YoY; ¥834,000 per sqm, up 11.9% YoY
  • Kanagawa Prefecture: Average sales price ¥52,980,000, down 2.9% YoY; ¥768,000 per sqm, down 0.1% YoY
  • Saitama Prefecture: Average sales price ¥45,630,000, up 6.0% YoY; ¥642,000 per sqm, up 3.7% YoY
  • Chiba Prefecture: Average sales price ¥44,500,000, up 3.3% YoY; ¥609,000 per sqm, up 4.1% YoY

Other highlights to take note of

  • Some developers may close model rooms for an extended time in the summer of 2020 (due to the Tokyo 2020 Olympics) which may have a negative affect on autumn sales numbers.
  • Flooding of the lower levels of some prominent tower condominiums following Typhoon 19 has made disaster-preparedness for riverside properties a key point to consider for buyers.
  • There are currently 110 condominium developers operating in greater Tokyo (down from 111 in 2018).
  • High-end condominium properties in central Tokyo continue to be extremely popular and price levels for this part of the market are forecast to remain stable. However, there are signs of price decline for properties located near stations in the suburbs.
  • Development themes are focused on energy-saving / energy-generating equipment and facilities to support child-rearing and to reduce housework.

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Source: Real Estate Economic Institute press release, December 2019, in Japanese

Lead photo: Blue toned Satellite Image of Tokyo via iStock