Tokyo condominiums unlikely to be priced down: analyst

Condominiums in prime locations are expected to see robust demand.

Condominium prices in the Tokyo 23W are at record levels, and Savills notes that this is due to multiple supply-side bottlenecks that have raised costs for developers. In addition, demand remains high due to continued population growth, favourable financing opportunities, and generally stronger purchasing power.  

“Given the considerably higher barrier of entry to buy a condominium in the Tokyo 23W, the rental market will thrive as more residents are likely to resort to renting over purchasing a home. Moreover, a sizable portion of the population growth in the 23W is rooted in the immigration of foreign nationals, a vast majority of whom are likely to be renters, providing a further boon for the rental market,” the report added.

Here’s more from Savills:

Contract rates in the 23W have hovered above 65% with the spike in prices in 2023 and 2024, showing that actual sales have slowed somewhat as new condominiums have been put out of reach for many buyers due to the high prices. However, condominiums in the Tokyo 23W are unlikely to be priced down as they are still in demand.

Furthermore, those in prime locations are likely to fare better due to the robust demand and limited supply. Some developers actually sell only one unit per buyer because investment demand in prime areas is so strong, in addition to the strong real demand.

Going forward, strong wage growth and wealth effect should strengthen domestic demand. On the other hand, if the Japanese yen appreciates, foreign demand may weaken somewhat. Overall, condominium prices are expected to remain high, although there is also expected to be considerable divergence in price direction depending on location.