Rising condo prices leave the Japanese with no choice but to lease 

The number of units up for sale is down 20.6%.

One full year has elapsed since the onset of the COVID-19 pandemic, and some mixed trends, both old and new can be observed. For instance, looking at condominium sales, Savills says the average price per sq m of condominiums on sale in Tokyo 23W has increased 11.4% YoY according to the Real Estate Economic Institute. The rising prices of condominiums in the 23W has made purchasing unattainable, leaving many to choose to lease instead. 

The number of units on sale has decreased by 20.6% YoY, with the big drop partially due to the state of emergency that suspended all activity. Nonetheless, condominiums situated in central locations and close to train stations have remained popular targets for purchasing. Henceforth, the apartment leasing trend should somewhat follow suit, although the current market trend appears to see subtle movement away from central areas. 

Here’s more from Savills:

One major impetus for change in the upcoming quarter would be the start of the new fiscal year in April. Each spring, an average year would see a significant inflow of migrants into the capital, as new workers and students move into the capital. During the COVID-19 pandemic, many companies and educational institutes resorted to telework and online lectures. However, as the pandemic has somewhat calmed down, many new employees and students are expected to be welcomed back into the office and on campus. For instance, 60% of major universities in Tokyo plan to have mainly in-person lectures while only 10% of them intend to offer mainly online courses. Looking ahead, we therefore expect to see some net migration uptick, encouraging rental conditions particularly within the smaller units of 15-30 sq m normally occupied by young professionals and students. 

Elsewhere, the residential market is also shifting in response to the emerging trends seen in the office sector. There has been rapid expansion in the number of satellite offices close to residential hubs, in accordance with the promulgation of flexible work styles. Looking at data from Google Mobility, people in Japan are at home 10% more than they were before the pandemic. Therefore, there should still be some demand for larger apartments, realistically in suburban areas, that can better accommodate this overall lifestyle change. Furthermore, the slow pace of vaccinations taking place in Japan could mean that this trend will unlikely be short-lived. 

To conclude, mixed trends have materialised in the market, with some movement away from central areas, and some concurrent reversal of this trend, albeit to a smaller extent. While this ongoing trend is likely to persist for a while, it may slow down when the pandemic situation calms down and there is less uncertainty in the market. The upcoming quarter transitioning into the new fiscal year will be a good indicator of shifts within the market.