Tokyo (東京都/Tōkyō-to/Tokyo Metropolis) is the capital of Japan. Facing Tokyo Bay, it is located in the central part of the Kanto Plain (see Figure 1). Tokyo is comprised of 23 special wards, 26 cities, 5 towns and 8 villages. The population is roughly 14 million as of November, 2023, 70% of which is concentrated in the 23 wards or ku (区), which are colored in light green in Figure 2.
Why does Tokyo have so many people? Apart from being the capital city of Japan where the governmental agencies are located, Tokyo has a large number of universities and companies. According to the survey conducted by the Ministry of Education, Culture, Sports, Science and Technology in 2023, more than 100,000 high school graduates moved from other cities to Tokyo for tertiary education. And the data from the Small and Medium Enterprise Agency tells that in 2021, about 424,000 out of 3,375,000 companies in Japan are located in Tokyo, creating jobs for 30% of all employees across Japan.
Tokyo is popular among not only locals but also international tourists. According to the data from the Japan Tourism Agency, nearly a half of the international tourists visited Tokyo. If we include those who come to Japan for purposes other than leisure (such as business), more than a half of those who visited Japan between April and December 2023 visited Tokyo. Chosen as No.1 destination in Tripadvisor’s annual Travellers' Choice Best of the Best 2024, No. 8 in Time Out’s The 50 best cities in the world for 2024, Tokyo’s popularity as a tourist destination seems to remain unchanged in the coming years.
[Figure 5] International Tourists Visit Rate by Prefecture (Top 15)
Population
As the chart from Our World in Data shows, the population growth rate in Japan is declining as those of the other G7 countries are. However, the interesting fact is that the population has been declining in 46 out of 47 prefectures in Japan since 2020. Which is the only one that is seeing the population grow?
[Figure 6] Historical population growth rate in G7 countries
It is Tokyo. According to the latest Population & Household Projection 2023 by National Institute of Population and Social Security Research, the population in Tokyo is seen to continue increasing until 2040.
[Figure 7] Population increase/decrease by prefecture
Property Market
The price of new condominiums is soaring. According to Real Estate Economic Institute Co., LTD, the average price in Tokyo's 23 wards rose 39.4% from the previous year to 114.83 million yen in 2023, surpassing the 100-million-yen mark for the first time since 1974. Selling prices are rising due to higher land acquisition costs and construction costs. Major developers are shifting supply to central Tokyo where sales can be expected even at higher prices.
The average price in the Tokyo metropolitan area (Tokyo, Kanagawa, Saitama, and Chiba) rose 28.8% to 81.01 million yen. The number of units launched in Tokyo 23 wards increased by 10.3% year-on-year to 11,909, while the decrease in the other areas pulled the total down by 9.1% year-on-year to 26,886, which is the lowest level since 1992.
The rise in the average price in Tokyo 23 wards over the last five years reached 60.8%. The rise stands out compared to Kanagawa Prefecture's 11.2% and Saitama Prefecture's 13.1%.
The absorption rate in the first month of sales exceeded 70%, the benchmark for favorable sales, for three consecutive years. The rate was 71% in the 23 wards of Tokyo, exceeding the benchmark for the first time in two years. Meanwhile, the rates in Kanagawa and Saitama prefectures were lower than the previous year, 68.5% and 61% respectively. The Real Estate Economic Institute explains that there are signs of a lull in demand in some areas due to soaring prices, such as a prolonged time from the launch until the sell-out.
[Figure 8] Number of launches and average price of new condominium units in Tokyo 23 wards
As for the secondary market, the overall price continues to rise. According to the data from REINS Market Information, the number of used condominium units sold in the Tokyo metropolitan area totaled increased by 1.6% to 35,987 units in 2023, marking the first year-on-year increase in two years. The average price per square meter of sold units in the Tokyo metropolitan area was 719,000 yen (6.9% increase y-o-y). The unit price showed a positive increase for 11 consecutive years, and an 88.3% increase over the past 11 years. The average selling price was 45.75 million JPY (7.0% increase y-o-y), rising for 11 consecutive years as did the price per square meter. The research agency explains that in terms of the price range, units above 50 million JPY are increasing in the number of units sold and the share to the overall market.
Buying Property as a Foreigner in Tokyo
Whether it is a house, condominium unit or a piece of land (only except for certain agricultural land), foreign nationals can acquire ownership title to real estate in Japan in the same way as Japanese nationals. Unlike other Asian countries, there are no restrictions on foreigners, or restrictions depending on the permanent residency/visa status.
The ownership has no specific term. Real estate can be freely bought and sold, donated, or inherited. There is no difference in the taxes and other fees for the purchase, ownership, and sale of real estate from those for Japanese nationals.
Land and buildings are considered separate and independent real estate; therefore, one person can hold the title to land while another person holds the title to a building on the land. When the owner of the building is different from the owner of the land the building is built on, the two owners will typically enter into a land lease contract to permit the building owner to use the land.
One thing to note is that the Act on the Review and Regulation of the Use of Real Estate Surrounding Important Facilities and on Remote Territorial Islands (the Important Land Review Act) came into force on 20 September 2022. Under the Act, any party who intends to enter into a contract to transfer or obtain ownership title to real estate within any 'special monitored area' must notify the Prime Minister in advance of the transaction. 'Special monitored areas' are designated as such based on the criteria under the Act, such as proximity of the real estate to certain important facilities or the real estate being located on certain border islands.
After a foreign investor's acquisition of real estate, a post-transaction report on cross-border payments or to payments between a foreign investor and a Japanese resident the government authority may be required pursuant to the Foreign Exchange and Foreign Trade Act (FEFTA).
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