How demographic trends impact Tokyo’s residential market

Locals congregate in the capital whilst foreign migrants will be concentrated in central and east Tokyo. 

In a recent report, Savills revealed that Tokyo 23W’s population has grown from 9.6 million in May 2019 to 9.9 million in May 2024. As the economic powerhouse of Japan, the city has seen strong growth as it is able to attract large numbers of young migrants in search of employment and education opportunities. 

Within the 23W, Savills said some submarkets have demonstrated considerably stronger population growth than others. Indeed, recent population trends have seen greater focus on the Inner East, the C5W, and the Inner North submarkets. 

“More specifically, on Chuo, Chiyoda, Taito, Sumida, and Bunkyo. Looking ahead, other major large-scale projects in Yaesu and Nihonbashi, together with Torch Tower in Tokiwabashi, which will serve as another centrepiece of the redevelopments in the area, should generate further interest in Chuo ward and surrounding areas as a place to live,” the report added.

Here’s more from Savills: 

Meanwhile, other wards surrounding central areas have also seen amicable population growth, although many constituents in the South submarket, namely Setagaya, Ota, and Meguro, and the West submarket’s Suginami have performed below average. Elsewhere, the Outer East submarket has seen the slowest population growth between January 2019 and April 2024. 

Indeed, the post-pandemic environment appears to have shifted most of the attention back to central areas, probably due to a combination of dwindling levels of flexible work arrangements and the post-pandemic environment breathing life back into central business districts. 

That said, some cities west of the 23W have seen commendable population growth between 2019 and 2024, like Kokubunji at 3.7%, and Inagi at 3.4% - almost on par with the C5W average. Many other cities in Tokyo have also performed around the same level as peripheral members of the 23W. 

Indeed, some paradigm shifts that materialised during the pandemic like greater preferences for larger room sizes appear to continue lingering, and inflationary pressures may have driven some to seek such apartments that are more affordable in areas away from central locations. Going forward, the central wards will likely receive the lion’s share of attention.

In addition, foreign nationals have grown to become an integral component of this population growth. In January 2019, there were around 550,000 foreign nationals in Tokyo prefecture or 4.0% of the population, which has grown to almost 650,000 in January 2024, comprising 4.6% of the population. 

In fact, the National Institute of Population and Social Security Research forecasts suggest that by 2035, more than 10% of people in Japan between 18 and 34 years old will comprise foreign nationals, up from 5.7% in 2020. In this light, Tokyo is likely to attain this level much faster than the national average. 

Strong performers include eastern and northern submarkets, along with a few members of the C5W, which have seen the largest changes in terms of proportion of foreign nationals relative to the total population. One prominent factor at play could be the cluster effect where people of similar backgrounds tend to congregate in the same area, and this manifestation could further propagate the foreign national populations of these areas. 

Overall, we predict that Tokyo’s population will continue to grow moving forward. While Japanese nationals will continue to congregate in the capital, it appears that foreign migrants will likely comprise an increasing proportion of this growth, with a particular concentration in central and east Tokyo. 

Furthermore, many of these residents will likely be renters, which should shore up demand in the rental residential market and raise the prospects for further rental growth.