Residential real estateThe residential real estate market in Japan is characterized by a large supply of new housing each year and a relatively small market for second-hand properties. Combined with a rapidly shrinking population, this has led to a growing housing stock and rising vacancy rates, especially in less populated areas. A growing share of empty homes, many of them abandoned and dilapidated, contrasted with strong demand for new homes and a surge in residential property prices in 2021, primarily driven by an increase in condominium prices. This occurred against a backdrop of changing workstyles, rising building material costs, and construction delays during the pandemic. Next to domestic customers, demand in the residential real estate market is partly driven by foreign investors. Except for some historically protected locations, Japan has no restrictions on foreign real estate property ownership, making it an attractive market for investors from other countries.
Rising prices have prompted homebuyers in Tokyo to turn to the resale housing market. A record 39 thousand pre-owned condominiums were sold in the Greater Tokyo Area in 2021, and prices rose accordingly. Second-hand housing sales only account for a fraction of housing construction starts each year but have been trending upward in the past years.
Commercial and industrial real estateThe major metropolitan areas have shown an increase in commercial land prices over the past years, fueled by Japan’s burgeoning tourism industry and low interest rates that led to increased hotel and office building numbers throughout the country. While the pandemic and the decline in tourism temporarily hit commercial land prices, prices for industrial land continued to rise amid a growing e-commerce market and increased demand for logistics facilities.
When it comes to the office market, the pandemic and its impact on workstyles ended a trend of declining vacancy rates and rising rents across the country that lasted until the beginning of 2020. After the outbreak of the pandemic, the vacancy rate of office space in Tokyo's central business districts, Chiyoda, Chuo, Minato, Shibuya, and Shinjuku, increased considerably, parallel to a slow but steady decrease in rents.