Japan

Japan Residential Real Estate Market Analysis 2024

Lalaine C. Delmendo

Japan's residential property prices continue to increase modestly, despite slowing demand, weakening construction activity, as well as lackluster economic performance.

Table of Contents

Housing Market Snapshot

In the first quarter of 2024, the nationwide residential property price index rose by a modest 2.65% from a year earlier, following year-on-year increases of 1.96% in Q4 2023, 2.54% in Q3, 4.78% in Q2, and 4.12% in Q1, according to the Land Institute of Japan. However, when adjusted for inflation, prices were more or less steady over the same period.

Japan's house price annual change

Quarterly, nationwide residential property prices were up slightly by 0.92% (0.54% inflation-adjusted) in Q1 2024.

House price growth started to slow last year, at an average of just 1.9% - a sharp deceleration from annual increases of 7.2% in 2022 and 6.3% in 2021.

However, there are wide price variations in terms of location and property type.

In the Tokyo Metropolitan Area:

  • Existing condominium average prices rose strongly by 7.9% in May 2024 to JPY 722,700 (US$4,814) per square meter (sqm), following y-o-y increases of 6.4% in 2023 and 11.5% in 2022.
  • New condominium average prices rose by a modest 3.6% in May 2024 from a year earlier, to JPY 1,201,000 (US$8,059) per sqm, following y-o-y price growth of 42.5% in 2023 and 3.1% in 2022.
  • Existing detached house prices were down by 2.2% y-o-y to JPY 40.07 million (US$268,869), following annual growth of 7.2% in 2023 and 7.3% in 2022.

In Osaka Metropolitan Area:

  • Existing condominium average prices fell slightly by 0.2% to JPY391,380 (US$2,626) per sqm in May 2024 from a year earlier, after falling by 9.7% during 2023 and increasing strongly by 23.8% in 2022.
  • New condominium average prices were up by 1.8% y-o-y to JPY810,000 (US$5,435) per sqm in May 2024, a sharp deceleration from annual increases of 5.1% in 2023 and 15.4% in 2022.
  • Existing detached house prices fell slightly by 0.5% y-o-y to JPY23.23 million (US$155,873) in May 2024, in contrast to annual growth of 11.1% in 2023 and 9.4% in 2022.

Japan Residential Property Price Index graph

Demand remains weak. In Tokyo, sales of both existing condo units and detached houses fell by 0.7% and 4.6%, respectively, in the first five months of 2024 as compared to the same period last year. In Osaka, sales of existing condominiums declined by 4.2% while detached house sales increased slightly by 0.6% over the same period.

Residential construction activity is falling. In the first five months of 2024, the total number of authorized housing starts in Japan dropped 3.8% to 323,445 units as compared to a year earlier, following a decline of 4.5% in the full year of 2023 and increases of 0.5% in 2022 and 5% in 2021, according to the MLIT.

Japan Tokyo Condominium Prices graph

During 2023, the Japanese economy expanded by 1.8% from a year earlier, following annual growth of 1% in 2022 and 2.6% in 2021, buoyed by the recovery in inbound tourism and automobile output.

However, the country's economy contracted by an annualized 1.8% in Q1 2024, in contrast to a slight growth of 0.4% in the prior quarter. As such, the International Monetary Fund (IMF) has recently downgraded its 2024 economic growth forecast for Japan to 0.7%, from its earlier estimate of a 0.9% expansion.

Demand Highlights

Demand continues to fall

Demand remains weak, with residential property sales in both Tokyo and Osaka still falling this year.

In the first five months of 2024:

  • In Tokyo, the number of existing condominiums sold fell slightly by 0.7% to 15,577 units, following an annual decline of 9.6% during the whole year of 2023, according to LIJ. Likewise, existing detached house sales dropped 4.6% y-o-y to 7,630 units, following an 11.5% decline in 2023.
  • In Osaka, existing condominiums sold fell by 4.2% y-o-y to 7,125 units in Jan-May 2024, after an annual drop of 4.1% in the full year of 2023. On the other hand, existing detached house sales in Osaka increased by a meager 0.6% to 4,550 units, following an annual fall of 2.5% in 2023.

This is despite robust foreign demand, buoyed by the weak Japanese yen and the country's ultra-loose monetary policy. Moreover, there are no legal restrictions on foreigners buying and owning real estate property in Japan.

Japan Existing Condominium Sales graph

Residential land market showed mixed results

Land sales continue to fall in Tokyo, but have shown considerable improvements in Osaka.

In Tokyo, land sales were down by 6.3% y-o-y to 4,106 units in the first five months of 2024, following a huge annual decline of 19.9% for the whole year of 2023, according to LIJ. In contrast, in Osaka, land sales increased by 4% to 2,760 units over the same period, after falling by 11.6% during the full year of 2023.

Surprisingly, residential land prices were more or less steady. During 2024, the nationwide residential urban land price index rose slightly by 0.7%, following annual increases of 0.7% in 2023 and 0.6% in 2022 and a slight decline of 0.2% in 2021, according to the Japan Real Estate Institute.

  • In six major cities (Tokyo, Osaka, Yokohama, Nagoya, Kyoto, and Kobe), residential land prices rose by 0.8% in 2024 from a year earlier, after increasing by 1% in 2023 and 0.7% in 2022 and declining by 0.6% in 2021.
  • For the rest of the country, residential land prices were up 0.7% in 2024, following increases of 0.7% in 2023 and 0.6% in 2022 and a slight fall of 0.3% in 2021.

Japan Urban Land Prices graph

Supply Highlights

Residential construction activity weakening

In the first five months of 2024, the total number of authorized housing starts in Japan fell by 3.8% to 323,445 units as compared to a year earlier, following a decline of 4.5% in the full year of 2023 and increases of 0.5% in 2022 and 5% in 2021, according to the MLIT.

In major areas:

  • In the Tokyo Metropolitan Area, which accounts for about 37% share of total residential construction, the number of housing starts declined by 2.9% y-o-y to 119,018 units in Jan-May 2024, following an annual fall of 2.9% in 2023 and increase of 2.8% in 2022 and 3.4% in 2021.
  • In the Osaka Metropolitan Area, housing starts fell by 5.5% y-o-y in the first five months of 2024, to 46,558 units, following a slight decline of 0.6% in 2023 and annual increases of 0.5% in 2022 and 3.7% in 2021.
  • In the Nagoya Metropolitan Area, housing starts increased by 8.1% y-o-y to 27,381 units in the first five months of 2024, following a decline of 7.2% in 2023, zero growth in 2022, and an increase of 7.2% in 2021.
  • In other areas, housing starts dropped 6.1% y-o-y to 130,488 units in Jan-May 2024, following annual declines of 6.4% in 2023 and 1.5% in 2022 and an increase of 6.4% three years ago.

Japan Housing Starts graph

Available supply of new condo units down in Tokyo, but up in Osaka

The supply of new condominium units available for sale shows mixed trends.

In Tokyo, the number of newly-built condo units put on the market fell by 4.7% y-o-y to 11,829 units in Jan-May 2024, following annual declines of 12.5% in 2023 and 11.3% in 2022.

In Osaka, on the other hand, new condominiums on the market rose strongly by 24.1% y-o-y to 8,217 units over the same period, after falling by 18.5% in 2023 and 7.9% in 2022.

The total number of new condominium units put on the market has been generally falling in the past three decades.

In Tokyo, newly-built condo units available in the market fell from an annual average of 80,900 units in 1994-2007 to 42,300 units in 2008-2018, and further to just an annual average of 30,000 in 2019-2023.

Likewise, in Osaka, new condo units put on the market declined from an average of 35,200 every year in 1994-2007 to 20,900 units in 2008-2018 and to below 16,900 units annually in 2019-2023.

Japan New Dwelling Units Put on the Market graph

Japan's shrinking population is producing a surplus of housing

One of Japan's biggest problems is its declining population. It is estimated that Japan will lose a third of its population over the next 50 years, and the population will more than halve from 126.8 million in 2017 to just 50.56 million in 2115, according to the National Institute of Population and Social Security Research. In addition, about 40% of the population will be over 65 by 2060.

During 2023, the country's total population fell to 124.62 million, down by 550,000 people from the previous year. It was its thirteenth consecutive year of decline. Japan's population is expected to fall by another 581,000 people this year.

The shrinking population is already producing a surplus of housing units. There are many sightings of abandoned homes in Tokyo. There are already an estimated 8.