2024 Property Investment Forecast in Japan: Expert Insights and Opportunities

Real estate prospects in Tokyo for 2024 are looking bright. According to a survey by Mitsubishi UFJ Trust and Banking, property prices in Tokyo are expected to increase by around 8% annually. This news is drawing the attention of many investors to start securing properties in Tokyo. Prices for newly built condominiums in Tokyo's 23 wards are continuing to rise by about 7% annually.

Despite some challenges like the yen's depreciation and fluctuations in corporate performance due to the US interest rate hike of 2023, Tokyo's real estate market stays strong. Most respondents see big price hikes, especially in central Tokyo.

The optimism among developers not only reflects the current market trends but also guides future housing strategies for 2024. Forecasts predict ongoing growth, with experts expecting strong sales and rising average prices, especially high value properties.

Market Demand for Luxurious Properties

According to the chart's projections, there is a notable divergence in price increases within Tokyo's real estate market. Properties priced over 60 million yen are expected to experience a substantial 8% surge in value, indicating strong demand and potential profitability for high-end real estate investments. Conversely, properties priced under 60 million yen are forecasted to see a slightly lower but still significant increase of 7.7%. This disparity underscores a growing preference for luxurious apartments among buyers and investors alike. As such, these findings position luxurious apartments as an increasingly promising option for property investments, reflecting the evolving landscape of Tokyo's real estate market. Furthermore, Tokyo's status as a global megacity has led to rapid urbanization and an influx of domestic and international residents. This population growth fuels demand for high-quality housing options, including luxurious apartments.

Market Forecast According to Experts

Oki Yuujin - CEO of Style Act

According to Oki Yuujin, the real estate market in Tokyo's 23 wards continues to rise by around 7%, while six of the central wards experience an even higher increase of up to 10%. This consistent upward trend in prices is influenced by competition for land acquisition among developers of hotels and offices, coupled with rising construction and labor costs. The prices are expected to keep rising, although the rate of increase is forecasted to be gradual.

Another reason prices are going up is because there are fewer new housing developments available in 2024 compared to 2022. The prediction says that the supply will drop by 33%, from 30,000 units to 20,000 units. Even though prices are expected to go up slowly, it's smart to buy your unit soon to get ahead. Limited supply means more competition, so waiting too long might mean someone else takes the unit you want.

One other thing that matters a lot when it comes to buying an apartment is the loan interest rate. According to Oki, fixed interest rates are expected to go up. Variable rates linked to short-term rates should stay about the same, though they might increase as wages and prices in the market rise.

Yosuke Tamagawa - CEO of Coreplus & Architecture

According to another expert, Yosuke Tamagawa, price level of properties will reach its peak in 2024. This is because the lesser supply of properties that will be available in Tokyo. Recently, new properties market are wealthy owners and foreign investors. Yet, their interest might lower down in 2024. However, it is worth noted that according to the forecast, the price of the properties will not drop, if anything it will gradually increases.

There is no doubt that condominiums continue to be valuable assets, especially for high-value unique properties located in prime and developed areas, which will continue to rise in value. However, Yosuke argues that properties in Tokyo are becoming more volatile assets instead of stable, appreciating assets, especially with the prediction of higher loan interest rates in the future. Therefore, you need to be more careful when selecting your properties, it's better to focus on high-value ones.

Japan's interest rates are likely to increase slightly. There is a high possibility that the Bank of Japan will attempt to raise short-term interest rates, making short-term mortgage not the ideal candidate. On the other hand, fixed interest rates for mortgages are already stable at a high level, so there wouldn't be much difference for those opting for long-term rates. Lastly, floating interest rates really depend on the current market situation. Even If they decides to increase, it will only be a slight rise.

Takashi Ide - Senior Researcher at Tokyo Kantei

According to Takeshi Ide, the average price in the six central wards of Tokyo is expected to rise slightly after 2024. However, the increase is not for all properties, this year prediction is the general to high-scale properties will rise, while the others will remain the same or even worse, go down. To take an example, in 2023, the average price of high end expensive properties in Minato Ward rose, while other properties remained almost unchanged. The rise in prices in urban centers is expected because many large-scale developments are coming up, and the supply of high-priced properties will continue in anticipation of demand from the local and overseas investors.

The supply of condominiums is expected to decline due to increasing construction costs, which make it more expensive to build properties. Rising prices also limit the number of people who can afford to purchase them and increase the difficulty of acquiring land. However, the number of households in central Tokyo is increasing, driving continued demand for housing.

There are predictions that negative interest rates will be lifted in 2024, and Takeshi believe that there is a possibility that variable interest rates will rise accordingly. However, even if it does rise, it will only be around 0.1 to 0.2%. There is little impact on the loan repayment amount, so There's no need to be afraid. To begin with, the current variable interest rates are exceptionally low, and even if they go up a little, it wouldn’t affect too much.

Top 10 Earning Power Rankings by Station in the Metropolitan area

From 2012 - 2022

Tokyo Kantei research has revealed city rankings focused on the profitability of newly built condominiums leased for 10 years and sold in 2022. This data underscores the promising opportunities present in Japan's real estate market. Looking ahead to 2024, the investment potential appears equally if not more promising, especially considering the ongoing urban developments across Japan. With this momentum, the landscape for real estate investment in Japan continues grow.