Introduction
Welcome to the Q1 2025 edition of our Tokyo real estate price series, covering January through March 2025. Tokyo’s property market continued its upward trajectory in early 2025, fueled by robust buyer demand (both domestic and foreign) and limited new supply. All data and trends discussed here reflect this first quarter period. Tokyo real estate prices reached new highs in many segments, with Tokyo apartment prices (especially in central wards) remaining at record levels. Notably, the average price of a new condominium in central Tokyo has now exceeded ¥100 million (around $800,000) for the second year running. This quarterly report provides insight into how Tokyo’s property values have performed in Q1 2025 and what’s driving the market, as part of our ongoing series tracking the city’s real estate trends.
Market Overview (Q1 2025)
Tokyo’s housing market opened in 2025 on a firm footing. The Residential Property Price Index for the Tokyo Metropolitan Area (covering Tokyo and surrounding prefectures) jumped 8.14% in January 2025 compared to a year earlier. Tokyo Prefecture itself led with an even higher +10.7% year-on-year price increase as of January, outpacing growth in neighboring areas. (By contrast, Kanagawa saw about +4% YoY and Chiba just +1.3% YoY in the same period.) This builds on the momentum from last year’s gains – recall that Tokyo home prices rose roughly 8.4% over the whole of 2024 – highlighting that the uptrend has continued into Q1 2025.
Several factors underpinned these first-quarter price gains:
- Demand Outstripping Supply: Buyer interest remains intense, while new housing supply is constrained. In fact, the number of newly built condominium units in Greater Tokyo fell sharply last year (down ~17% in 2024) to the lowest level since 1973. This limited inventory has carried into 2025, creating competition for available properties.
- Low Interest Rates: Japan’s ultra-low interest rate environment persists. Even with a slight policy shift by the Bank of Japan (with the policy rate nudged up to around 0.25%, its highest since 2008), borrowing costs remain minimal. Cheap financing has enabled buyers to continue purchasing, softening the impact of high prices.
- Economic Recovery and Confidence: Japan’s economy has stabilized with modest inflation and growth, improving buyer confidence. Unemployment remains low, and wages have seen mild upticks, supporting housing demand.
- Foreign Investment & Weaker Yen: Tokyo real estate continues to attract overseas investors, partly thanks to a weaker yen. In early 2025, the yen hovered around multi-decade lows against the dollar, making Tokyo property comparatively affordable by global standards. (For example, US$1 million buys roughly 64 square meters of prime Tokyo property, double what it would in Singapore.) Foreign buyers — especially from around Asia — have been active in the high-end segment, accounting for about 20% of luxury condo purchases in central Tokyo. This international demand added to the first-quarter momentum.
Bottom line: The Tokyo real estate market in Q1 2025 showed strong price growth and resilient demand fundamentals. Next, we’ll examine how Tokyo apartment prices fared, particularly in the coveted central wards.
Tokyo Apartment Prices & Luxury Segment
Tokyo apartment prices remain elevated at record levels as of Q1 2025, especially in the 23 central wards. According to the Real Estate Economic Institute, the average unit price of a newly built condominium in Tokyo’s 23 wards hit ¥116.3 million (approximately $820,000) in the 12 months through March 2025. This marks an 11.2% year-on-year increase and the fourth consecutive year of record highs. Even on a per-square-meter basis, new apartments in central Tokyo are incredibly pricey, averaging about ¥1.7 million per sqm (roughly ¥170 million for a 100 sqm unit). High construction costs and land values, plus an emphasis on luxury developments, have kept new launch prices high.
The resale apartment (condominium) market is also surging. Existing pre-owned apartment prices in metropolitan Tokyo climbed about 7.8% year-on-year as of January 2025. Many buyers priced out of the new condo market have turned to resale units, pushing those values up. In Tokyo’s secondary market, the average asking price for a standard 70 sqm apartment reached around ¥69.8 million in February, up 4.1% from the year prior. This surpassed the previous record high set late last week, indicating persistent appreciation even in the second-hand segment.
The luxury sector in particular is thriving. There has been a notable increase in the number of ultra-high-end condos (¥100 million+ price tags) coming to market and being sold. In fact, new unit offerings priced above ¥100 million surged by 72% compared to the previous year, reflecting developers’ focus on affluent buyers. These expensive units have found eager takers: luxury condos in central districts (Minato, Chiyoda, Chuo, Shibuya, etc.) continue to see strong absorption. Wealthy local buyers and foreign investors alike are drawn to properties in prime locations – often tall condominium towers with premium amenities and views of the Tokyo skyline. This sustained appetite at the top end helped drive Q1 2025’s apartment price growth and shows no sign of waning.
It’s worth noting that while headline prices are up, buyers are still paying attention to value. Some outlying neighborhoods have seen slight corrections or slower growth for older properties that lack modern features. However, any soft spots have been localized. Overall, Tokyo’s apartment values in early 2025 have proven remarkably strong, underpinned by a combination of limited supply of units, robust demand (especially for quality locations), and the city’s enduring status as a safe asset haven.
Key Drivers: Supply Crunch, Demand, and Investment Trends
Limited Supply: Tokyo’s property price gains in Q1 2025 must be viewed in light of a persistent supply crunch. As mentioned, new housing construction has not kept up with demand. In 2024, only about 23,000 new condo units were released for sale across Greater Tokyo, a 14% drop from the prior year. Inventory of unsold new units remains relatively low (around 6,800 units on the market at the end of 2024). This trend continued into Q1 2025 – developers have been cautious with project launches due to high construction costs and labor shortages. Fewer new projects coming online means buyers are often competing for a limited selection of properties, which in turn supports higher prices.
Domestic Demand: On the demand side, Tokyo benefits from unique demographic and economic tailwinds. It is Japan’s only prefecture that is still gaining population, buoyed by both urban migration and incoming foreign residents. The capital’s status as an economic hub means it attracts professionals and families seeking the opportunities and lifestyle Tokyo offers. This continual in-migration feeds housing demand at all levels. Additionally, Japan’s post-pandemic economic recovery (steady GDP growth and controlled inflation of ~1%) has improved consumer sentiment. Many domestic buyers see real estate as a stable store of value amid low interest rates, encouraging property investment rather than leaving cash idle.
Foreign Investment: International interest in Tokyo real estate was notably strong in early 2025. A combination of the weaker yen and Japan’s reputation for stability has drawn more foreign capital into the market. In 2024, foreign investment in Japanese real estate topped $10 billion, with a 45% jump in the first half alone amid yen depreciation. Residential property investment by overseas buyers rose 18% year-on-year to ¥740 billion last year, a trend that likely extended into Q1 2025. High-net-worth individuals from elsewhere in Asia, North America, and Europe continue to view Tokyo as offering comparative value for prime assets. Relative to other global cities like New York or London, Tokyo’s luxury apartments can appear underpriced for the quality and location they offer. This quarter saw foreign buyers particularly active in central Tokyo’s upscale condominium market, adding an extra layer of demand competing with local buyers.
Monetary Policy & Financing: Japan’s financial conditions in Q1 2025 remained highly accommodative for real estate. Mortgage rates are still near historically low levels; for instance, Flat 35 home loan rates remain around 1.5%–1.6%, only slightly above their all-time lows. The Bank of Japan did begin adjusting its ultra-easy policy (as noted, inching the benchmark rate up to 0.25%), but this is still negligible compared to rate hikes seen in the US or Europe. The result is that financing costs in Tokyo remain cheap, which supports higher price tags – buyers can stomach paying more when their monthly interest payments are low. Importantly, Japanese banks have continued to lend readily for real estate, and credit remains accessible for qualified borrowers, including investors. In short, liquidity is ample, and there has yet to be a monetary squeeze that would dampen the property market in any significant way.
Rental Market Health: It’s also helpful to mention that Tokyo’s rental market is strong, which complements the sales market. High rents and low vacancy rates provide reassurance to investors that properties will generate income. In late 2024 and into 2025, residential rents in Tokyo’s central wards have been rising at roughly 5–6% per year. As of Q4 2024, average rent in the 23 wards hit ¥4,332 per sqm, up 6.4% YoY. Occupancy rates are very high (over 96% in major rental buildings). These conditions mean that even as purchase prices climb, rental yields (around 4% gross nationwide, slightly lower in Tokyo) remain relatively stable. For investors, the combination of capital appreciation and steady rental income in Tokyo is an attractive proposition – another factor sustaining demand in Q1 2025.
Outlook for the Next Quarter
Looking ahead, the outlook for Tokyo’s real estate market remains optimistic yet measured. Market analysts forecast that Tokyo property prices will continue to rise in 2025, though perhaps at a moderated pace compared to the last two years’ rapid gains. Mitsubishi UFJ Trust and Banking, for example, projects Tokyo residential prices to increase about 5–6% in 2025, a slight deceleration from the roughly 8% growth seen in 2024. This suggests that while the uptrend is intact, the market may be nearing a plateau in terms of growth rate, as prices have already climbed so high.
Several dynamics will be important to watch in the coming months (Q2 2025 and beyond):
- Interest Rate Changes: The Bank of Japan’s further moves to normalize monetary policy could gradually raise borrowing costs. Even small rate increases might cool investor sentiment at the margins or reduce buyers’ leverage. So far, however, the BOJ has signaled caution and is unlikely to hike rates aggressively in the near term, especially with inflation under control.
- Supply Response: Given the strong pricing environment, it will be interesting to see if developers ramp up housing starts. There is pent-up demand, and 2025 is expected to see a modest uptick in new condo supply (forecast around 26,000 units, up from 23,000 in 2024). If more projects come to market later in the year, it could gradually ease the supply-demand imbalance. However, construction costs remain high, which might keep new supply limited primarily to luxury or high-margin projects.
- Global Economic Factors: Tokyo’s real estate does not operate in a vacuum. Global financial conditions – such as foreign exchange rates and investor risk appetite – will continue to play a role. If the yen stays weak or weakens further, expect foreign investors’ interest to stay strong. Conversely, any sharp strengthening of the yen or global economic downturn could temper overseas demand. At the same time, Japan’s stability can act as a safe haven if other regions face turmoil.
- Policy and Taxation: The Japanese government’s policies on real estate investment, including any changes in taxes or regulations, bear watching. So far, authorities have not implemented any drastic cooling measures (unlike some other countries) because price growth, while robust, is not seen as a speculative bubble but rather a recovery to fair values after decades of stagnation. In Tokyo specifically, local policies to encourage housing development or adjust property taxes could mildly influence the market trajectory in upcoming quarters.
In summary, as of the end of Q1 2025, Tokyo’s real estate market is extremely robust, characterized by rising prices, tight supply, and sustained demand from both domestic and international buyers. The Tokyo apartment market in particular has solidified its status at the high end, with multi-million dollar luxury condos now the norm in prime districts. For high-net-worth individuals and investors, Tokyo’s property sector continues to offer a compelling mix of capital appreciation potential and stability. This Q1 2025 report underscores that trend, and we will continue to monitor how these factors evolve in the next quarterly update. Stay tuned for the Q2 2025 edition of our Tokyo real estate price series, as we track whether the market’s remarkable performance continues through the year.
