Tokyo’s condo market to stay resilient amidst tight supply

Spillover demand lifts residential outlook beyond Central Tokyo.

Condominium prices across Tokyo’s 23 wards continue to climb to record levels, underpinned by robust housing demand and persistent supply constraints, according to Savills Japan.

In its latest residential market update, Savills said demand remains resilient, supported by steady population growth, relatively low interest rates, and stronger wage growth following consecutive years of solid outcomes from Japan’s annual Shunto wage negotiations.

At the same time, new condominium supply continues to shrink. Savills attributed the decline to elevated land, construction and labour costs, as well as the limited availability of land zoned for residential use. Competition from developers in other asset classes has further constrained new project launches, intensifying supply-side pressure across the market.

Demand has been particularly pronounced in the central five wards (C5W), where condominiums continue to attract high-net-worth individuals and foreign buyers. Savills noted that some purchasers view these centrally located properties not only as primary residences, but also as investment assets or second homes, given their scarcity and long-term value preservation.

Looking ahead, Savills expects spillover demand from the central wards to increasingly support price growth in the peripheral wards of the Tokyo 23 wards (23W). Recent increases in net migration into family-friendly districts are likely to benefit larger-format residential units, especially among households seeking more spacious layouts at comparatively lower price points.

In its outlook, Savills said condominium prices across the 23W are expected to remain firm, supported by limited new supply and strong domestic and foreign demand. Buyers continue to benefit from accommodative financing conditions and improved purchasing power driven by wage growth, while foreign demand is further supported by the weakened yen and Tokyo’s strong liveability credentials.

As rising prices increasingly price out some would-be homebuyers, Savills anticipates further expansion of the rental market. Residents are reassessing purchasing plans and opting to rent for longer, while continued positive net migration into the 23W — driven largely by foreign nationals — is expected to sustain rental demand and underpin capital value growth for residential assets.

Savills noted that contract rates for condominiums across the 23W have averaged around 68% over the past three years, although momentum has moderated recently. As at Q3 2025, contract rates dipped to 63%, indicating a slowdown in new condominium sales. Despite this, prices are expected to remain elevated due to strong underlying fundamentals and tight supply.

Policy developments may also shape near-term sentiment. Savills highlighted that newly appointed Prime Minister Sanae Takaichi has announced plans to introduce measures aimed at curbing speculative short-term real estate transactions, a factor that has contributed to price growth in Tokyo. Details are expected to be outlined in Japan’s Foreign National Policy Framework, due for release in January 2026.

While the proposed measures may prompt some investors to adopt a more cautious stance in the interim, Savills said the broader outlook remains positive. Rising construction costs, continued population inflows, and strong wage growth are expected to limit future supply and support domestic demand, while foreign interest is likely to remain resilient.

“The tight supply-demand balance should continue to reinforce the residential market in Tokyo’s 23 wards,” Savills said, pointing to ongoing price resilience despite moderating sales momentum.