The market prices for Tokyo real estate and rent are continuing to rise. Looking at the “International Real Estate Price and Rent Index”, Tokyo was the top city in the world in terms of office price variation for the six months between October 2015 to April 2016, at 4.3%. In terms of condominium prices, Tokyo followed Shanghai and Beijing in 3rd place. Around 3 years ago, Tokyo ranked 5th in rent prices, behind Singapore, London, New York, and Hong Kong. Although the subject of the survey is different, around 10 years ago Tokyo ranked also 5th, meaning it seems around 5th place is Tokyo’s regular position.
These past few years, Tokyo’s real estate market has seen rises, and in some parts of the market there is a sense of caution. In fact, going into 2016 there were traces here and there of economic newspapers and think tanks showing caution regarding the market peaking out. ? However, compared to other leading cities, Tokyo’s price rises don’t really stand out. According to the previously mentioned “International Real Estate Price and Rent Index”, setting 2010 as a benchmark of 100, Tokyo in April 2016 would have an office price index of 132.8. Compared to this, Beijing would be at 196.5, New York at 186.1, and London at 183.4. Condominium prices also yield similar results. Even disregarding places such as China, which are experiencing rapid economic growth and showing signs of a real estate bubble, or developing areas, Tokyo’s growth rate is low compared to New York or London.
While it is definitely true that metropolitan areas are seeing increases in rent and real estate prices with Tokyo at the forefront, monthly rises are stuck at a small scale, and in actuality only increase gradually. Considering this, these increases don’t seem to be speculative, but part of the overall background of the economic condition. Deflation continued for the twenty years following Japan’s real estate bubble bursting in the early 90s and 2010, with economic conditions so poor they are referred to as “the lost two decades”. During that time, there were temporary rises in the real estate market, but incidents such as the Lehman Shock or 2011 East Japan Earthquake quashed them.
According to JP Morgan Securities analysts’, while major work cities such as New York, London, and Singapore etc, have real estate markets with over 50% of investment coming from overseas, roughly 90% of Tokyo’s market is made up of those aiming to buy property. (As of 2015).? Water flows from high to low. This is the same with investor money, which flows from relatively expensive to cheaper places. Currently, London is seeing investor money diverted due to Brexit, and in New York the rise in interest rates via the FRB becoming less certain. Singapore’s once famous momentum also seems to be lacking.
If this rise is part of the cycle of the Japanese economy breaking out of deflation and into inflation, then it seems the Tokyo real estate market is likely to keep going up.
Sep. 20, 2016