In this article, I will discuss the latest trends in the Japanese apartment market, covering both new and second-hand apartments.
Based on the 2023 Land Price Publication by the Ministry of Land, Infrastructure, Transport, and Tourism, urban land prices, particularly in the Tokyo metropolitan area, have been increasing for the past two years.
This rise in land prices has been observed in both residential and commercial areas, but recently, there have been concerns about the potential impact of financial instability in the US and Europe on Japan’s real estate market.
For the residential areas, Urayasu City in Chiba Prefecture stands out due to its high evaluation as a residential base with good access to the city center and a favorable natural environment. In the Tokyo metropolitan area, land prices in all 23 wards have increased, with Taito, Toshima, and Nakano Wards showing the highest increase rates.
New Apartment Market Trends in the Tokyo Metropolitan Area, February 2023
Let’s look at the trends in the Tokyo metropolitan area’s new and second-hand apartment market.
Regarding the new apartment market, the number of new apartments released for sale in the Tokyo metropolitan area in February 2023 was 1,821 units, a decrease of 20.4% from the same month of the previous year. The average price per unit for new apartments was 67.78 million yen, a decrease of 8.6% compared to the same month of the previous year.
The unit price per square meter was 1.015 million yen, a decrease of 7.3% compared to the same month of the previous year. However, the contract rate remained flat at 73.3% compared to the same month of the previous year, and this figure exceeds the threshold for determining market conditions, typically 70%.
|Number of Units Released
Second-hand Apartment Market Trends in the Tokyo Metropolitan Area, February 2023
Now, let’s take a look at the second-hand apartment market. The average selling price per square meter for second-hand apartments has increased by 9.9% compared to the same month of the previous year. The number of transactions has increased by 3.0%. The number of transactions for second-hand apartments in the Tokyo metropolitan area in February 2023 was 3,240, an increase of 3.0% compared to the same month of the previous year (3,146 units), marking an increase in comparison to the previous year for the first time in seven months.
The average selling price for used apartments in the Tokyo metropolitan area has increased by 8.3% compared to the same month of the previous year to 43.59 million yen. The average selling price per square meter is 687,100 yen, an increase of 9.9% compared to the previous year. The selling price per square meter has been higher than the previous year for 34 consecutive months. Additionally, the selling price per square meter increased by 0.6% compared to the previous month. The average square meter price in February 2023 was 740,500 yen, and the selling price for new listings remains strong.
|Average Selling Price per sqm
|Change from same
month last year
|Tokyo 23 wards
|Tokyo suburbs (Tama area)
|Other areas of Kanagawa Prefecture
Why are Apartment Prices Increasing?
In an open market, prices fluctuate based on supply and demand. The primary buyers of new apartments support the relatively stable Japanese apartment market, typically in their 30s to 40s, and taking advantage of low-interest rates.
The 2021 Capital Region New Apartment Contract Trends Survey conducted by Recruit Co., Ltd. reported that almost 7 out of 10 new apartment buyers were in their 30s and 40s, representing about 69.7% of the total buyers. An increasing proportion of dual-income households also drives the demand for apartments. According to the Basic Survey on Employment Statistics, the percentage of women working while raising children has increased by over ten percentage points from 2012, with 62.0% of those aged 30 to 34 and 64.1% of those aged 35 to 39 working in 2017.
The preferences of new apartment buyers reflect these trends. In 2021, a record-high 74% of married households among new apartment buyers were dual-income.
1. Decline in Supply of New Apartments
However, the supply of new apartments has significantly decreased from its peak. According to Real Estate Economic Institute data, the peak supply of new apartments in the capital region was 95,635 units in 2000. In the past six years, the supply has fallen below 40,000 units, and in 2021, it was still in the 55% range compared to 61,021 units in 2007 before the Lehman Shock.
The decrease in supply is due to several reasons. One reason is the decreasing availability of land suitable for apartment development as cities urbanize. While former factories, warehouses, and company housing were repurposed in the past and transformed into large-scale apartments, the conversion of such sites into commercial use has largely ended. In recent years, redevelopment and reconstruction projects requiring commercial use adjustments have become more prominent.
2. Rising Construction Costs
Another reason is the rising cost of construction. Construction costs are affected by labor, raw material, transportation, and soaring prices of global resources. As of March 2022, the Construction Cost Index for reinforced concrete apartment buildings released by the Construction Pricing Survey Institute was 130.3 in net construction cost. This index is based on an average of 100 in 2011, indicating that construction costs have increased by about 30% in the past decade.
The cost of new apartments is mainly composed of land and building costs. The rising construction costs affect the profitability of suburban areas where land is relatively cheap, and the proportion of building costs is high, thereby suppressing the supply of new apartments. Insufficient supply relative to demand will ultimately result in rising prices.
A record-high 54.5% of people are considering new and second-hand apartments side-by-side in 2021. Therefore, the supply and demand trends for new apartments also affect the supply and demand for second-hand apartments.
I hope this information helps you understand the factors contributing to the rising prices of apartments in Japan.