Tokyo’s strong residential hub appeal unlikely to wane: analyst

Sustained rental growth and occupancy rates are expected to continue this year.

The positive momentum continues in the Tokyo 23W residential market in Q2/2025. According to a Savills report, moderate rental growth was observed even after the robust gains seen in Q1/2025 in most constituent wards, translating to strong annual growth across the market.

“Strong net migration took place between March and May 2025 as part of the spring peak moving season, the level of which was on par with the previous year. The elevated net influx has continued to support rental demand, with foreign nationals comprising a notable proportion of incoming residents,” the report said.

Here’s more from Savills:

Prices of for-sale condominiums in the Tokyo 23W remain elevated, and the cost of compliance with new stricter energy efficiency standards introduced in April 2025 will likely push up development costs and prices further, possibly pricing more residents out of the market and shifting greater levels of demand to the rental market.

Additionally, despite uncertainty as to the timing of interest rate hikes by the Bank of Japan given the global uncertainty, they are likely to take place in late 2025 or beyond, slightly increasing borrowing rates for prospective homeowners and likely shifting some demand further from the for-sale market to the rental residential market. That said, some buyers, especially in the central wards, may move quickly to secure for-sale properties at lower borrowing costs, sustaining some demand for the meantime.

Looking ahead, Tokyo’s appeal as a residential hub is unlikely to wane, and the city should retain its strong demographic fundamentals. As such, the Tokyo 23W residential market should perform well, with sustained rental growth and elevated occupancy rates likely to continue in 2025.

A significant proportion of Tokyo’s working population who are not working at large companies are unlikely to fully benefit from recent wage increases, and the recent bullish rental growth, compounded by inflation will likely force some to seek more affordable rental options in peripheral wards, which should spread rental growth across the entire Tokyo 23W.