What is the state of the Tokyo new condominium market and where is it likely headed?

By Jeff Wynkoop

March 31 is the end of the fiscal year for a huge majority of companies in Japan. Looking back at the last year, we saw the Official Land Prices (koji chika) for residential zones in Tokyo’s 23 main wards rise for the seventh consecutive year. Nevertheless, the pace of the growth in land prices (4.6%) was slower than the previous year’s growth (4.8%), which some attributed to the impending Olympic effect.


The average price for a new condo in Tokyo’s 23 main wards reached a new post-bubble record in 2019, hitting 59.8 million yen.

The important point here is that, perhaps due to lower carrying costs, Japanese condo developers who in the past preferred to bring all completed units to market, and take any temporary drop in local prices in stride, in 2019 began to change strategy, preferring to hold more assets on the balance sheet for relatively longer, and only releasing a slow trickle instead of a torrent of new properties in a local area (as was seen especially after 2008). In the end, this coupled with rising construction costs has helped keep prices high, even in the event some buyers balk at the higher prices.

The fact that seven very large companies control over 50% of the new housing market in Tokyo also means that in practice they can more or less keep new condo prices high as long as they smooth out the supply. 

Location, location, location

Demand for new condos also remained high during the majority of the last fiscal year, provided the new condo was in a central and convenient location.

New properties completed in the last year by reputable developers such as Tokyo Tatemono’s 1247-unit “Shirokane The Sky”, located a mere three minutes from the main station in the highly desirable Shirokane Takanawa area, and brought to market in November 2019, sold briskly, although the price (6.7 million yen per 3.3 sq. meters) was significantly higher than average Tokyo new condo prices (3.09 million yen per 3.3 sq. meters according to Tokyo Kantei). In sum, to a higher degree than ever before, consumers are paying for convenience and what they perceive as an asset’s likelihood of maintaining positive long-term asset values.

According to Tokyo Kantei, roughly half of the new properties brought to market in Tokyo over the last year were five or less minutes from the nearest station. Although generally developers prefer to build residential properties on parcels of land as close to a train station as possible, over the last few years Tokyo land prices have jumped due to new hotel developments in central Tokyo. The growing number of hotel developments has pushed a greater number of new residential developments further from the station than in the past.

Other Cities

A similar trend can be observed in other cities throughout Japan as well. For instance in Sapporo, Tokyu Real Estate has developed the Branz Maruyama Gaienmae property, a luxury property located three minutes from the nearest station and only a five-minute train ride from central Sapporo. Although average properties in the building are going for over 100 million JPY (a price greatly exceeding the average buyer’s budget), apparently there are only a few units left.

Looking ahead

Regardless of what happened in 2019, we all know that from the beginning of 2020, the global business environment began to change radically due to the unprecedented coronavirus pandemic. In Japan, effects have been slower to emerge than in some other countries, but it can be expected that future demand for office space (due to an increase in working from home) and hotel accommodations (due to the precipitous drop in tourism) will not be as robust as during the last seven years. In turn, less new office and hotel developments means more, cheaper land for new residential developments, which will certainly be a factor exerting downward pressure on future new condo prices in Tokyo. Although no one knows for sure how this is going to play out, it seems likely that future real estate trends will have to be revised downward.

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