Japan Residential Real Estate Market Analysis 2025

Sales prices and asking rents in Japan continue to rise at varying rates, influenced by location and property type, as demographic shifts and regulatory changes reshape the market, further widening the gap between central metropolitan areas and peripheral regions.

This extended overview from Global Property Guide covers key aspects of the Japanese housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Housing Market Snapshot
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

Residential property prices in Japan continue to rise, though the pace of growth differs significantly across locations and property types. According to the Nationwide Residential Property Price Index, compiled by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) based on transaction data for residential plots and condominium units, prices increased 3.74% year-on-year as of May 2025. The condominium segment recorded the strongest growth at 8.28%, followed by land at 2.33%. Detached houses, in contrast, saw only a modest increase of 0.52%.

The Bank of Japan (BOJ), in its latest Financial System Report, noted that "rises in property prices are led by robust property demand with the economy recovering moderately and by supply factors due to the effects of the surge in material costs and labor shortages."

Condominium prices in particular remain a key driver of overall growth. The JREI Existing Condominium Price Index, released by the Japan Real Estate Institute, reported a 10.47% year-on-year increase in the Tokyo metropolitan area as of July 2025. Within the region, Tokyo posted the steepest rise at 12.62%, followed by Chiba (7.55%), Kanagawa (6.58%), and Saitama (4.63%).

In addition to rising costs, supply-demand imbalances in major urban centers are being reinforced by internal migration as well as sustained domestic and foreign investment. As analysts at Tosei Group observed, "continued inflows of investment funds are driving up the average price of urban center properties, and the price gap with suburban areas is widening."

Japan's house price annual change:

Note: Japan (Tokyo) House Price Index: Average Price of Existing Condominium Sales in the Tokyo Metropolitan Area
Data Source: The Land Institute of Japan.

The Land Research Institute reports that newly built condominium prices in the Tokyo metropolitan area surged more than 20% year-on-year in July 2025, both on a per-unit and per-square-meter basis. The average transaction price for a new unit reached JPY 93,960,000 (USD 639,797). In comparison, average unit prices in the Osaka metropolitan area stood at JPY 58,130,000 (USD 395,821). Although Osaka's per-square-meter price rose nearly 16% year-on-year, the average per-unit price growth remained subdued due to a sharp reduction in unit size, from 67 sqm in July 2024 to 59 sqm in July 2025.

Growth in the existing homes segment, encompassing both condominiums and detached houses, was considerably weaker. Tokyo continued to outpace Osaka, but the momentum in secondary-market properties remained subdued compared with the new-home sector.

Sales price dynamics, selected submarkets:

Looking ahead, Fitch Ratings projects limited nationwide growth of 0-2% in 2025, supported primarily by weakening new-home supply. However, regional divergence is expected to deepen. Core cities are likely to sustain strong demand, while smaller markets will depend more heavily on policy measures. As Asia Economic News notes, "core cities will continue to attract investor attention due to their economic vitality and high demand, while the recovery of local city real estate markets will rely more on policy support and innovative measures."

Mitsubishi UFJ Trust and Banking forecasts that Tokyo residential prices will rise by about 5-6% in 2025, a moderation from the roughly 8% increase in 2024. As Yasuharu Matsuno, Co-founder and CEO of Blackship Realty, explained, "this suggests that while the uptrend is intact, the market may be nearing a plateau in terms of growth rate, as prices have already climbed so high."

Demand Highlights:

Price Surge Pushes More Buyers Toward the Pre-Owned Market

Demand for newly built housing in Japan remains concentrated in urban centers and prime locations, where competition for limited supply continues to be strong. This resilience is underpinned by steady population inflows, a substantial share of which are younger residents with a marked preference for modern housing stock. According to the Annual Report on Internal Migration issued by the Ministry of Internal Affairs and Communications, in 2024, Tokyo recorded a net population increase of 79,285, about 11,000 more than in 2023.

Foreign investment has also been a key factor supporting demand. The weak yen has made Japanese real estate comparatively more attractive to international buyers. "With the weakened yen, foreign buyers are still likely to find Japanese condominiums attractive, especially when compared to other developed markets in Asia like Hong Kong or Singapore," commented experts from Savills. While official data on foreign buying is unavailable, a semi-annual survey by Mitsubishi UFJ Trust & Banking Corp., published in March 2025, found that in Tokyo's Chiyoda, Shibuya, and Minato wards, between 20% and 40% of new apartments are typically sold to foreign buyers.

By contrast, regional markets characterized by large numbers of vacant "akiya" homes continue to struggle with weak demand, highlighting the sharp divergence between dynamic metropolitan cores and more stagnant peripheral areas.

The contract rate for newly built condominium units, defined as the percentage of units sold within the first month of sales and widely used as a benchmark for market demand, showed mixed performance across regions monitored by the Real Estate Economic Institute Co., Ltd. A rate of around 70% is typically regarded as an indicator of healthy demand, with higher levels suggesting strong absorption and lower levels pointing to weaker market conditions.

In the Greater Tokyo Area, the contract rate edged down slightly to 66.56% from 66.95% in 2024, with Tokyo's 23 wards registering 68.8%. According to Savills, although rising prices and financing costs have discouraged some buyers in the capital, overall demand in prime locations remains solid. "Demand [for prime residential units] remains resilient, particularly among affluent domestic and international buyers who appear largely unaffected by rising interest rates. Continued net migration into the capital further reinforces this demand base," Savills experts noted.

In the Greater Osaka Area, the contract rate increased to 77.15% from 74.34% in 2024, exceeding the 70% threshold typically regarded as an inflection point.

Data Sources: Real Estate Economic Institute Co., Ltd.

With supply tight and prices for newly built condominiums rising, many households are turning to the second-hand market. In Greater Tokyo, 24,659 pre-owned condominium units were sold in the first half of 2025, a year-on-year increase of 27.17%, according to the statistics compiled by the Land Research Institute. Greater Osaka showed similar momentum, with sales rising 24.68% year-on-year to 8,582 units. "Demand for pre-owned condominiums has increased due to the escalating price of newly-built units. In addition, there has been a rush to purchase homes against the backdrop of expectations for higher mortgage interest rates," commented experts from Tosei Group.

Data Source: Land Research Institute.

Supply Highlights:

Rising Costs, Regulatory Burdens, and Demographic Shifts Reshape Japan's Housing Market

Supply of new housing in Japan remains subdued. According to the Statistics Bureau of Japan (SBJ), in 2024, annual housing starts declined 3.35% year-on-year to 792,195 units, the first time in 15 years that starts fell below 800,000. That downward trend carried into 2025, with 423,309 dwelling starts in January-July 2025, representing a 7.80% year-on-year drop.

Data Source: MLIT.

The contraction was broad-based, with all major metropolitan regions recording negative growth. The Greater Nagoya Area saw the steepest decline at 9.55%, followed closely by other regional markets (-9.44%). The Greater Tokyo Area, which accounted for the largest share of new starts (37%), fell by 6.94%, while the Greater Osaka Area recorded a relatively smaller decline of 4.94%.

Residential construction dynamics, by submarket:

Looking ahead, the Research Institute of Construction and Economy (RICE) expects the downtrend to persist, projecting total housing starts of 780,000 units for fiscal year 2025 - a further decline of 4.4% year-on-year. Analysts cite several near-term headwinds, including rising construction input costs, labor shortages, and recent regulatory changes. As real estate consultant Akito Hashimoto noted: "Persistently rising land and construction costs, combined with the new mandatory energy-saving standards introduced in April 2025, are increasing procedural complexity and raising overall project costs."

Structural, longer-term forces are amplifying these cyclical pressures. The SBJ population data shows that Japan's population fell by approximately 550,000 in 2024 to 123.8 million, with the share of residents aged 65 or older approaching 30%. This demographic contraction is damping household formation and long-run demand for new housing, particularly outside major urban centers, and is therefore reducing developers' incentives to initiate new projects.

At the same time, an expanding stock of vacant homes ("akiya") is creating a material latent supply that undermines the economics of new construction in low-demand areas. As of October 2023, the SBJ reported roughly 9 million vacant homes nationwide, equivalent to a 13.8% vacancy rate, both record highs. Vacancies varied markedly by prefecture, reaching around 13.6% in Kagoshima, 12.9% in Kōchi, and 12.2% in Tokushima, while major metropolitan prefectures show much lower rates (about 2.6% in Tokyo, 3.2% in Kanagawa, and 3.8% in Saitama). Research indicates many vacant properties are neither rented nor sold and are often inherited and left unused, perpetuating excess housing stock in weaker local markets.

Rental Market:

Strong Growth for Condominium Asking Rents in Tokyo Continues

The rental segment represents a substantial share of the Japanese housing market. According to the results of the 2023 Housing and Land Survey published by the SBJ, 35.0% of the country's occupied dwellings are rented, with an even higher share of tenants observed in major cities such as Tokyo (48.9%), Yokohama (37.1%), Osaka (53.9%), Nagoya (48.8%), and Kyoto (42.6%).

Japan's rent price index:

Data Source: OECD.

An ample supply of older rental properties in many urban areas, coupled with comparatively low financing costs of new development and demographic trends supporting stable but not intensifying rental demand, has kept rental inflation for existing contracts in the country relatively low, even during the periods of accelerated overall price growth. In August 2025, the actual rents (excluding imputed) component of the consumer price index (CPI) reported by the SBJ showed just a 0.5% year-on-year increase nationwide, while the all-item CPI increased by 2.7% during the same period.

At the same time, asking rents for newly listed properties are growing at a much faster pace, according to the apartment rent index developed by the real estate platform At Home and Sumitomo Mitsui Trust Research Institute. In Q2 2025, the index recorded year-on-year increases in all key submarkets across the country, from 7.99% in Tokyo 23 Wards to 5.27% in Tokyo Suburbs, 5.52% in Nagoya City, 4.82% in Osaka City, and 2.36% in Kyoto City.

An analysis from the local real estate investment and management company Kenedix suggests that strong growth in asking rents in Tokyo is tied to continued demand-supply imbalance, and that the upward pressure on rents in the capital can be expected to continue. "While the population inflow to the Tokyo metropolitan area is accelerating, the supply of residential properties is not increasing, suggesting that the apartment market in the metropolitan area is tight. In particular, while Tokyo's 23 wards are the center of the population inflow, the supply of residential properties is declining, and the tightness of the market is likely to be even stronger," said the report.

Data Source: SBJ.

In nominal terms, figures from At Home reveal a diverse dynamic in average asking rents across Japan's cities. In Tokyo 23 Wards, rents stand substantially higher and grow faster than in other key submarkets for all unit categories. In August 2025, asking rents in the capital ranged from JPY 103,952 (USD 704) for units up to 30 square meters to JPY 392,192 (USD 2,657) for larger units exceeding 70 square meters. For small and medium-sized units up to 50 square meters, the annual increase in average rents reached double digits.

Looking ahead, experts from Savills expect Tokyo to continue outperforming other areas: "Tokyo's strong market fundamentals should support bright prospects for the residential sector, on top of historic wage growth and moderate sustained inflation proceeding in Japan, which suggests that there should be more room for rental growth moving forward."

Average asking condominium rents in selected submarkets by property size:

Gross rental yields for residential properties in Japan continue to fluctuate below the 4.5% mark, according to the research conducted by Global Property Guide. In August 2025, the indicator averaged 4.47% across the monitored submarkets, only marginally up from 4.22% previously reported in January and 4.33% in June 2024. The highest potential performance was observed in Fukuoka and Sapporo (4.98% both), while in Tokyo, the average yield was recorded at 3.59%.

Mortgage Market:

Interest Rates Still Low But Rising Gradually

While still at very low levels, interest rates on housing loans in Japan have increased somewhat along with the normalization of the central bank's monetary policy. After years of maintaining a negative rate of -0.1%, the BOJ increased the target for the uncollateralized overnight call rate three times in 2024 and early 2025, bringing it to the current level of around 0.5%.

At the most recent monetary policy meeting in September 2025, the BOJ decided to maintain the current stance, encouraging the rate to remain at around 0.5 %. However, local experts anticipate further increases in the upcoming months, possibly as early as October or at the latest in January next year.

"With an agreement reached on tariffs between Japan and the US, and the negative impact of the tariffs that was once feared to be imposed being limited, the environment is beginning to be in place for a rate hike. Although the Bank of Japan is taking a cautious stance, there is a high probability that a rate hike will be implemented within the year," said the mortgage screening platform Mogecheck in its latest market overview.

Data Source: BOJ.

A higher policy rate led to higher interest rates on mortgages across the board. According to data accumulated by Mogecheck, in September 2025, interest rates on variable loans stood at around 0.7%-1.0%, up from 0.4%-0.6% during the same period a year ago, with the country's three megabanks offering slightly cheaper credit than internet banks and regional banks. For 10-year fixed mortgages, interest rates were reported at around 2.2%, up from 1.5% in September 2024, and for loans under the government-backed Flat 35 program, interest rates increased from about 1.8% to about 1.9% within the last twelve months.

If another hike in the BOJ policy rate is announced between October and February, banks can be expected to raise their base interest rates for variable loans in April 2026. "Since many banks review their base interest rates for mortgages every April and October, few banks will raise interest rates immediately even if the Bank of Japan raises interest rates," Mogecheck experts explained.

Interest rates on mortgages by type:

In the low-interest-rate environment, despite the recent uptick, new loan production in Japan has recovered after a weaker performance in 2022 and has been growing since, as many banks appear to be prioritizing sales volume over raising rates. The combined value of new housing loans produced by the country's licensed banks and shinkin banks (regional cooperative financial institutions) increased by 3.0% year-on-year in 2023 and by 7.2% in 2024, based on the BOJ reporting. Between January and June 2025, the combined value of new credit granted reached JPY 9.78 trillion (USD 65.8 billion), demonstrating a 2.8% growth compared to the same period last year.

Data Source: BOJ.

The overall size of the housing loan market in Japan also continues to expand gradually at an annual rate of 2.8%, on average, over the last 15 years. As of Q2 2025, the BOJ reported a total value of outstanding housing loans standing at JPY 171.8 trillion (USD 1.2 trillion). Of the combined stock, 89.6% was represented by loans maintained by licensed banks, with the remaining 10.4% made by loans from shinkin banks. In relative terms, Japan's housing loan market has been stable in the last five years, estimated to equal 27.8% of GDP at current prices in 2024.

Data Sources: BOJ, World Bank.

Socio-Economic Context:

Growth Prospects Limited by Trade Barriers, High Debt, and Demographic Challenges

After three decades of near-zero inflation, Japan's economy is now struggling to find a new equilibrium amid elevated inflation and a global slowdown, while also facing domestic challenges, such as its aging population and high public debt. Economic activity in the country slowed from 1.5% real GDP growth in 2023 to just 0.1% in 2024 due to temporary supply disruptions during the first half of the year.

The most recent economic activity outlook from the BOJ tied moderation in growth to the slowdown in overseas economies and decline in domestic corporate profits and noted that "Japan's economic growth rate is likely to rise, with overseas economies returning to a moderate growth path". The July 2025 update of the World Economic Outlook from the International Monetary Fund (IMF) expects Japan's GDP growth to reach 0.7% in 2025 and 0.5% in 2026.

Supported by the BOJ adjustment of its monetary policy, consumer price index (CPI) inflation in the country moderated from the historically high annual level of 3.3% in 2023 to 2.7% in 2024 and was most recently reported by the SBJ at 2.7% in August 2024, still above the central bank's target, however. Against the background of subdued economic activity, the IMF projects the indicator to drop to 2.4% in 2025 and 1.7% in 2026.

Data Source: IMF.

With an aging population and demographic decline among Japan's most pressing issues, the country's labor market continues to suffer from a contracting labor force. As outlined in the 2025 Article IV staff report from the IMF, the working-age population of Japan declined by around 13% over the two decades before the pandemic, and the share of the population aged 65 or older is now the highest in the world. "Aging has already had a considerable impact on Japan's labor market, contributing to current labor shortages <…> These trends are expected to continue with the working age population expected to decline by a further 35% by 2065," said the report.

According to the IMF, amid these demographic trends, Japan's labor market tightened further, supporting low unemployment and wage growth. Unemployment dropped to pre-pandemic levels (most recently reported by the SBJ at 2.3% in July 2025), while the job openings to applications ratio stabilized at a relatively high level. Labor shortages reported by firms have surpassed their pre-pandemic highs, particularly in the services sectors, including healthcare and construction. Strong nominal wage increases typically announced during spring negotiations, however, remain lackluster in real terms, recovering only a small portion of the inflation-induced fall in real wages since 2021.

Data Source: SBJ.

Overall, Japan's advanced, wealthy economy with correspondingly robust governance standards and public institutions faces weak medium-term growth prospects, currently weighed down by very high public debt (estimated at 236.7% of GDP in 2024), domestic demographic challenges, and global trade headwinds.

"Trade barriers in the United States and weakening global growth are likely the two largest threats to Japan's economy over the next year. High inflation has certainly hindered consumer spending and GDP overall, but price growth is expected to ease as rice prices move lower and a stronger yen shields the economy from higher import costs," Deloitte experts summarized in their July 2025 economic outlook. "Otherwise, Japan's economy is in relatively good shape. A tight labor market is expected to support wage growth and consumer spending. It will also likely push business investment higher as companies look for labor-saving technologies. Should inflation and trade headwinds die down, Japan could see a substantial rebound in growth."

Sources:

1. Statistics Bureau of Japan (SBJ)
   1. Housing Starts Statistics (JA): https://www.e-stat.go.jp/
   2. Report on Internal Migration in Japan: https://www.stat.go.jp/
   3. Current Population Estimates as of October 1, 2024: https://www.stat.go.jp/
   4. 2023 Housing and Land Survey. Basic Tabulation (JA): https://www.stat.go.jp/
   5. Consumer Price Index Nationwide, August 2025 (JA): https://www.stat.go.jp/
   6. Labor Force Survey, Results for July 2025 (JA): https://www.stat.go.jp/
2. The Bank of Japan (BOJ)
   1. Financial System Report (April 2025): https://www.boj.or.jp/
   2. Statement on Monetary Policy, September 19, 2025: https://www.boj.or.jp/
   3. Deposits and Loans Market: https://www.boj.or.jp/
   4. Outlook for Economic Activity and Prices, July 2025: https://www.boj.or.jp/
3. Ministry of Land, Infrastructure, Transport and Tourism (MLIT)
   1. Real Estate Price Index (JA): https://www.mlit.go.jp/
4. Japan Real Estate Institute (JREI)
   1. July 2025 JREI Home Price Indices: https://www.reinet.or.jp/
5. Land Research Institute
   1. Monthly Data on Real Estate Economy. September 2025 (JA): https://www.lij.jp/
6. Real Estate Economic Institute Co., Ltd
   1. Tokyo Metropolitan Area New Condominium Market Trends: H1 2025 (JA): https://www.fudousankeizai.co.jp/
   2. Kinki Region New Condominium Market Trends: H1 2025 (JA): https://www.fudousankeizai.co.jp/
7. Research Institute of Construction and Economy (RICE)
   1. Quarterly Outlook of Construction and Macro Economy: https://www.rice.or.jp/
8. Japan Economic Foundation (JEF)
   1. What Is the Current State of Japan's Vacant House Issue?: https://www.jef.or.jp/
9. International Monetary Fund (IMF)
   1. Country Overview: Japan: https://www.imf.org/
   2. 2025 Article IV Staff Report: https://www.imf.org/
   3. The Impact of Aging and AI on Japan's Labor Market: Challenges and Opportunities: https://www.imf.org/
   4. World Economic Outlook Update, July 2025: https://www.imf.org/
10. Organization for Economic Co-operation and Development (OECD)
    1. Japan Economic Outlook Projection Note, June 2025: https://www.oecd.org/
11. World Bank
    1. World Development Indicators: https://databank.worldbank.org/
12. Federal Reserve Economic Data (FRED)
    1. US Dollar Exchange Rate: Average of Daily Rates: National Currency: USD for Japan: https://fred.stlouisfed.org/
13. At Home Co
    1. Apartment Rent Index, Q2 2025 (JPA): https://business.athome.jp/
    2. Rent Trends for Rental Apartments and Condominiums in Major Cities Across Japan, August 2025 (JPA): https://athome-inc.jp/
14. Kenedix
    1. KENEDIX Real Estate Market Report 3Q 2025: https://ssl4.eir-parts.net/
    2. KENEDIX Real Estate Market Report 1Q 2025: https://ssl4.eir-parts.net/
15. Mogecheck
    1. Latest Trends in Mortgage Interest Rates in September 2025 (JPA): https://mogecheck.jp/
16. Tosei Group
    1. Financial Results for the First Six Months of the Fiscal Year 2025: https://pdf.irpocket.com/
17. Tokyo Portfolio
    1. Tokyo Real Estate Prices Q1 2025 (Quarterly Market Trends): https://tokyoportfolio.com/
18. Savills
    1. Tokyo Residential Sales, H2 2024: https://pdf.savills.asia/
    2. Prime Residential Capital Value Growth and Forecasts: https://www.savills.com/
    3. Tokyo Residential Leasing Q2 2025: https://pdf.savills.asia/
19. Deloitte
    1. Japan Economic Outlook, July 2025: https://www.deloitte.com/
20. Fitch Ratings
    1. 2025 Global Housing and Mortgage Outlook Mid-Year Update: https://www.fitchratings.com/
    2. Fitch Affirms Japan at 'A-'; Outlook Stable: https://www.fitchratings.com/
21. Asia Economic News
    1. Predicting the Japanese Property Market in 2025: https://asiaeconnews.com/en/estate-en/
22. CNBC
    1. Property Price Surge in Tokyo's Prime Areas Sparks Calls to Curb Foreign Ownership: https://www.cnbc.com/