Buying a Property in Tokyo? Here’s what you MUST know.

2017 has been an exciting year for Japan Real Estate. According to Real Estate Japan, there has been a significant year-on-year increase in inquiries from foreigners looking to buy homes and investment properties in Tokyo. With the expected economic growth due to upcoming 2020 Tokyo Olympics and Casino, the trend is likely to persist in 2018.

To help our fellow investors better understand the Tokyo Property Market, we have decided to put together some research and analysis on the Tokyo property market.

tokyo

First, which areas should you look at?

If you are buying for investment, then definitely central Tokyo.

Despite the overall persisting population decline in Japan, Tokyo’s population growth has remained strong. As pointed out by one of the world’s largest real estate firms, Savills, Tokyo’s population has increased by 13% since 2000. Within Tokyo alone, the population within central areas has grown 36% over the same period, while income has grown 16% in the past six years.

A large proportion of this increase is coming from young professionals from other parts of Japan and expatriates from other countries. This alone has resulted in an increase in housing demand and an all time high occupancy rate. According to Savills, as of Q3 2017, average occupancy rates in Tokyo remain comfortably above 95%, with the occupancy rate of the central 5 wards (Chuo, Shinjuku, Shibuya, Minato, Chiyod) standing at 96.6%.

For those thinking of investing in Tokyo properties, focus on the central areas where there is high rental demand from both local and expatriates and we recommend zooming in on areas where we have seen an influx of new residents.

Which should I consider? New units or Resale Units?

With the increase in population growth and pent up demand from foreign investors, we are observing a spike in property prices especially in the central 5 wards where there is strong demand from local professionals and expatriates working in the CBDs.

However, for the average Japanese professional, prices in central Tokyo tend to be out of reach. For that reason alone, we have not seen demand for luxury residences in Central Tokyo grow as much in comparison.

In contrast, resale units in Tokyo are a lot more affordable than new launch apartments and are attracting strong demand from local and foreign buyers both. According to Land Institute of Japan, the average price of new condominium units in Tokyo was recorded as JPY790,000psm (HKD 58,521 psm) in Q1 2017, almost double the average price of resale condominium units, which are at JPY492,800psm (SGD 36,505psm). This price difference tends to be even more drastic in the central areas, where there has been a significant increase in land prices in the recent years.

On top of that, most resale units in Tokyo are already tenanted. This means that you need not wait for the completion of the condo, or look for tenants, or even negotiate rental prices with the tenants.

One short coming of purchasing a resale unit in Tokyo is that there may be some negative stigma towards resale homes. The Japanese prefer not to own pre-owned things, be it furniture, home appliances or the property itself. Therefore, if you wish to sell the property in the future, ensure your property is kept in a good condition to make it easier to sell to locals.

For investors, we recommend purchasing a resale unit as units tend to be priced more competitively and for the same budget, you would be able to purchase a unit that is comparably close to CBD areas, train stations and other amenities, making it easier to rent it out.

Where exactly within Central Tokyo?

When it comes to investing in central Tokyo, you may realise that different wards may offer different cultures and vibes, and depending on your investment objective or preference you may find certain wards more suitable than others.

Therefore, before zooming in on a specific project, you may wish to better understand the the 5 Main Wards of Central Tokyo.

Or, if you are already familiar with the 5 Main Wards of Tokyo, you can click here to skip to browse through some resale units we have picked out in each of these 5 Wards.

1. Chuo

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Chuo is a special ward that forms part of the heart of Tokyo. In Japanese, its name ‘Chuo’ literally means “Central Ward”.

For those who are less familiar with Japan, most tend to think of Shinjuku as the financial centre of Tokyo. However, few are aware that ‘Chuo’ is in fact Tokyo’s main commercial centre even before World War II.

Although you might be unfamiliar with Chuo, you would likely have heard about Ginza. ‘Ginza’, the most well-known district of Chuo, and likely the most popular upscale shopping area of Tokyo is populated with numerous internationally renowned department stores, boutiques, restaurants and coffeehouses located in its vicinity, and is home to some of the most expensive real estate in Tokyo, or maybe even in the whole of Asia.

Today, Chuo is home to numerous headquarters of both local and international corporations including Ricoh, Sumitomo Corporation, Daiichi Sankyo, KOSÉ, IBM and many more. Therefore, rental demand is especially high among high-income expatriates and senior executives of surrounding large corporations.

If you are looking to invest in sophisticated residential estates, Chuo may be able to offer you a number of suitable options where you can expect tenant profiles to easily include the likes of Presidents and Senior Executives of MNCs.

2. Shinjuku

shinjuku

The Shinjuku ward is widely recognised as one of Tokyo’s main CBD areas, hosting numerous high-rise offices and enormous Tokyo Metropolitan Government Offices.

The train station, Shinjuku Station, is the world’s busiest railway station, with more than two million passengers using the station on a daily basis. To the west of the station, is the famous skyline of high-rise offices and government buildings in Shinjuku’s skyscraper district, home to some of Japan’s highest buildings.

Although less vibrant as compared to Shibuya, Shinjuku is also famous for its huge entertainment, business and shopping area. With numerous department stores, cinemas, a wide variety of restaurants, cafes, and bars, Shibuya is one of the most popular residential areas among younger professionals and expats.

3. Shibuya

shibuya

Almost like the Orchard Road of Tokyo, Shibuya plays an integral role in the cultural fabric of Tokyo. Widely populated with numerous department stores, fashion outlets, entertainment and dining options, the area is especially popular among youngsters and expatriates. Bask in the neon glow of the hundreds of shops, restaurants and bars and a thriving nightlife, this makes Shibuya a city that truly never sleeps.

In the coming years, the business district near the train station will undergo extensive redevelopment, and is expected to add significant value to surrounding residential developments, even boosting rental demand in the area. The completion of Hikarie shopping and entertainment complex in 2012 marks the beginning of this ongoing transformation, making Shibuya an area worth watching out for.

Away from the busy shopping district lies the prime residential areas of Daikanyama and Ebisu, these quiet and sophisticated residential neighbourhoods’ hosts luxury boutiques, restaurants, and upscale retails. Due to its convenient location, Ebisu has also recently enjoyed substantial commercial development, adding more investment values to properties in the area.

With the developments and transformation ongoing in Shibuya, investors can not only look forward to substantial rental returns but also potential capital gains from redevelopment of the area.

4. Minato

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Similar to Chuo, Minato is also a prime commercial area, housing the headquarters of a large number of embassies and corporations like Sony, Honda, Mitsubishi, NEC, and many embassies.

Nestled among the other 4 main wards, Minato is known for being the upscale part of Tokyo. According to Tokyo Shoko Research, 1 in every 10 residents in Minato ward are company presidents, making it the ward with the highest concentration of presidents in Tokyo.

For those of you who are less familiar with Tokyo, you may have heard of the place Roppongi. In the recent years, Roppongi has become one of Minato’s most well-known districts, famous for its night scenes and popularity among Tokyo’s foreign community.

On top of that, two of Tokyo’s largest recent redevelopment projects, Roppongi Hills and Tokyo Midtown changed the district’s face over the past decade. With the numerous new retail, leisure and residential space, offices and luxury hotels, Roppongi now welcomes large throngs of visitors on a daily basis.

5. Chiyoda

chiyoda

Often called the “political center” of the country, Chiyoda hosts some of Japan’s most expensive land. It is also home to some of Japan’s most symbolic architecture including the Imperial Palace, Hibiya Park, National Museum of Modern Art, and Yasukuni Shrine.

Chiyoda’s prime residential area, Bancho, lies to the west of the Imperial Palace, with a substantial government and foreign embassy district located to the south, and the commercial district of Marunouchi to the east.

The ward also houses the famous Akihabara electronics district, commonly known as “Electric Town”. The “Electric Town” offers cutting edge technologies and multilingual duty-free shopping, and is a popular destination for those working in IT related industries.

Unlike the other four main wards which are relatively more vibrant, Chiyoda may not be the most prominent ward when it comes to entertainment and night life, yet this has little impact on the prime property prices and demand from local politicians and expats working in the embassies nearby.

Having formed a better understanding of the different wards, click here for a list of resale properties we picked out in each of the wards. Or, if you’ll like to experience investing in Central Tokyo, here’s your chance as Bridge C Estate Japan brings to Singapore the largest collection of properties in Central Tokyo this March. 

Register your interest in the upcoming Japan Properties Seminar brought to you by Bridge C Estate Japan
24th March 201825th March 2018

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