Will the strong momentum in Tokyo’s residential market hold throughout the year?

The Tokyo 23W market is expected to continue its positive performance.

The Tokyo 23W residential market performed robustly in Q1/2025. According to Savills, almost every ward experienced rental growth over the quarter and all wards saw considerable annual rental growth.

“Net migration into the 23W between December 2024 and February 2025 was positive, while total figures for 2024 reached record highs, driven largely by foreign nationals.  Looking ahead, net migration should continue in the coming quarter, with the upcoming peak spring moving season expected to bring a large influx of migrants to the Tokyo 23W,” the analyst said.

Here’s more from Savills:

Consistent rental growth has been supported by sound demand and supply. Strong wage growth is expected to continue in 2025 with the Shunto wage negotiations, bolstering the prospects for continued rental growth moving forward. In addition, the Bank of Japan is likely to raise interest rates further, which could potentially dampen demand for for-sale condominiums among prospective homeowners, consequently boosting rental demand.

Moreover, starting from April 2025, new residential buildings must meet stricter energy efficiency standards set by MLIT, and the cost of compliance is expected to be reflected in development costs and consequently unit prices.

Looking ahead, the Tokyo 23W residential market is likely to continue to do well, especially in the central wards, driven by high-income professionals who have benefitted from noticeable wage growth in the tight labour market.

On the other hand, households facing rising daily necessities costs due to the ongoing inflation or those seeking larger and more affordable spaces may continue to turn to the outer wards, where rents remain relatively lower and still have room for growth, supporting demand in these areas.

We believe that this strong momentum should continue this year, but the rental growth shown this quarter appears too strong, and should come back to a sustainable level.