The average rent for an apartment in the Tokyo 23 Wards hit a new peak in October. Renters in the 23 Wards paid an average of ¥3,716 per square meter, a year-on-year increase of 5.4%. This means, for example, that a typical 55-sqm family-sized apartment would rent for about ¥204,000 ($1,877) per month. This average is the highest point ever recorded by Tokyo Kantei (a real estate think tank) in its monthly rent surveys.
The year-on-year October increase is a just one data point in a longer term trend in which we will likely see average rent in the Tokyo 23 Wards steadily rise in the near future, primarily driven by inbound population growth. However, it’s important to note that we are talking about the overall 23 Ward growth trend, not where average rents in a particular ward or neighborhood will be headed.
How much have rents been rising in the 23 Wards?
Annual average rent in the 23 Wards has increased four out of the last five years.
Average January to October 2019 rent grew by 11.4% compared to the average rent in 2015, and 3.9% compared to 2018. The 3.9% growth rate calculated here differs from the 5.4% growth rate mentioned above because it is an average of 10-months, rather than just October data.
If you compare these growth rates to that in other major global cities, there may not be much to complain about (from the perspective of a renter), as people who rent in places like San Francisco, and Los Angeles have seen head spinning rent increases in the last few years.
However, if we consider that Japan as a whole is in the midst of a deflationary environment, it’s clear that average rent trends in the 23 Wards are not aligned with the overall CPI (Consumer Price Index). The data below is from inflation.eu.
- 2018 Japan CPI: 0.30%
- 2017: 1.10%
- 2016: 0.30%
- 2015: 0.10%
Tokyo 23 ward population trends
The long-term growth trend for average rent in the 23 Wards is mainly due to inbound migration from other areas in Japan.
Key population trends
- As of January 2019, the population of Tokyo (including the 23 Wards, western suburbs, and outlying islands) was 13,857,443.
- About 69% of Tokyo’s population or 9,569,121 live in the 23 Wards.
- Starting in 1996, the population of Tokyo has grown for 23 years straight.
- The population of Tokyo as a whole grew by about 1.0% in 2018 versus 2017, about 78% of this growth was due to migration from other parts of Japan.
- About 3.8% of the population of Tokyo as a whole or 521,500 are registered foreign residents. The majority of foreigners living in Tokyo, 439,959 or 84.4% live in the Tokyo 23 Wards.
- In 2018, Tokyo lost 3,415 registered foreign residents, who left the city. At the same time, the foreign population increased by 2,346 due to births and deaths.
- The number of foreigners residing in Japan as of the end of June 2019 was 2,282,416, up 3.6% compared to the end of 2018, with about 20% of registered foreigners living in Tokyo.
- The Tokyo Metropolitan Government projects that the number of households in Tokyo’s 23 wards will increase by about 200,000 (up 4.2%) between 2015 and 2030.
- In Japan, as the population ages and the marriage rate is declining, the number of smaller-sized households (defined as households with less than two people and single-parent households) is projected to increase. Tokyo’s 23 wards is expected to account for over 20% of this growth.
- According to Savills’s research, the Central 5 wards (Chiyoda, Chuo, Minato, Shibuya and Shinjuku) and the Inner East wards (Taito, Sumida, and Koto) are projected to have the highest rates of growth in the number of households.
Demand outstripping supply
The housing stock has not been able to keep up with inbound population growth. According to Tokyo Kantei, demand has outstripped supply across the board, from older buildings to newer construction. The population trends cited above will likely continue to push up rent levels.
However, population growth in the 23 Wards is not evenly distributed.
In 2018, the five fastest growing municipalities in Tokyo were:
- Setagaya Ward
- Shinagawa Ward
- Ota Ward
- Chuo Ward
- Edogawa Ward
In general, the cities in western Tokyo (lying west of the 23 Wards) saw slower growth and even negative growth.
Redevelopment projects in Futako Tamagawa (in Setagawa Ward) and the Shinagawa Station area, for example, have made these areas popular with families and couples drawn to modern condominium developments, with shopping, dining, and good schools, all within walking distance of major stations.
Condominium developers are also in tough competition with hotel developers for prime, centrally located land, and inbound tourism has been a major growth driver of increasing land prices. However, this means that asking prices for newly-built condominium developments have also been on the rise.
Does this mean my rent will go up next year?
Renters enjoy very strong tenant rights in Japan compared to most other countries.
With ordinary leases, the tenant has the right to renew indefinitely, so in general, it is not easy for a landlord to raise your rent, unless they have an extenuating business reason. It is also very hard for a landlord to evict a tenant unless it is an extraordinary circumstance (for example, long delinquency in paying your rent).
The average rent level in the 23 Wards will likely continue to increase, but this general trend shouldn’t, of course, be applied to analyzing specific neighborhoods, stations, or individual properties.
You may also be interested in:
- Where in Tokyo do most foreigners live?
- Number of foreigners living in Japan hits record high for 7th year in a row (2019)
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