Market Trends

Where is the Tokyo New Condo Market Headed 2017 to 2020: Forecast

Jeff Wynkoop

Average sales prices of newly-built condominiums in Tokyo’s 23 Wards are forecast to continue trending upward through 2020, albeit at a slower pace, according to a recent report by Real Estate Economic Institute (JREI). JREI also predicts that the rental market for new condos will continue to see steady growth in rent levels in the next few years.

This is according to a recent report released by the JREI (Nihon Fudousan Kenkyuujo) that forecasts new Tokyo condo prices for 2017 to 2020. The think tank’s projection is based on real estate data compiled for the JREI Home Price Index, which has been tracking rents and sale prices for condos in Tokyo’s 23 wards since 1998. JREI creates its projections by inputting rental and sales data into a forecasting model which simulates the effect macroeconomic factors such as a change in real wages, investment trends, or latent GDP rates, etc. may have on future prices.

Tokyo 23 Wards New Condo Price Forecast: 2017 to 2020

JREI is predicting that the average sale price of new condos (with an exclusive area of 40-80 square meters) will remain relatively high after the near double digit growth in prices in 2015.

New condo sale prices in Tokyo’s 23 wards grew at a brisk pace from 2013-2015, with price growth of 4.3% in 2013, 6.1% in 2014, and 8.9% in 2015.

After taking a short pause to level off in 2016 (-0.1%), JREI forecasts transaction prices for new condos will be up 0.7% this year, before a gradual slowing in growth to 2020, with 2018 forecasted to see 0.5% price growth, 2019 to see a 0.3% increase, and 2020 a slight 0.1% increase.

Nevertheless, this means that JREI is predicting Tokyo new condo prices will continue to trend up, but at a slower pace than over the past few years. This is in contrast to prices for pre-existing condos, where many are predicting that growing market demand will drive meaningful price growth in the right locations in the lead up to the 2020 Olympics.

Tokyo 23 Wards New Condo Rent Forecast: 2017 to 2020

JREI predicts the rental market for new condos will continue to see steady growth in rent levels, with average rents increasing roughly 1.4% this year, and maintaining 0.5% growth in 2018 and 2019, before slowing a little to a 0.4% rent increase in 2020.

An important assumption, however, is the consumption tax increase that the Abe administration delayed to October 2019 is enacted on schedule in 2019. JREI believes that in this case the Tokyo residential market will only be tangentially affected.

Longer-Term Forecast: 2025

JREI also announced its longer-term prediction for 2025 rent and price levels.

Generally, JREI sees the declining population only slowly affecting the Tokyo new condo market. Although JREI forecasts average rents to rise at a gradual pace until 2025 (to a level 3.2% higher than in 2016), they foresee prices to start a moderate decline from 2021 primarily due to Japan’s aging population and lower long-term growth prospects.

You may also be interested in: Effects of 2017 Tax Policy Changes on Japanese Housing

Source: Japan Real Estate Institute