Tokyo Real Estate: Investors Look for Older Buildings Over New Ones [Kim Yongnam's Real Estate Asset Management]

The landscape of the Tokyo real estate market in Japan is changing. While the supply of new condominiums is plummeting and prices are hitting all-time highs, renovated apartments are emerging as a new powerhouse. If you can't buy a new home, a renovated existing home that looks like new is becoming the alternative.

According to a report by Nikkei Asia, the supply of new condominiums in Tokyo's 23 wards last year was 8,275 units, a 30.5% decrease from the previous year. This is half the level of a decade ago and the lowest since 1973. On the other hand, in the fourth quarter of the same year, the transaction volume of renovated existing condominiums under 15 years old increased by 20% compared to the previous year. While demand remains strong, supply is blocked, and renovated apartments are quickly filling the gap.

Renovated apartments have gone beyond simply repairing old homes. They are being traded at premium prices with 'new-build-grade interiors' by applying high-end finishing materials and modern designs. As of April 2025, the average price of a renovated existing apartment in Tokyo's 23 wards was 44.51 million yen (approximately 420 million won), a 28.3% increase from the previous year, setting a new all-time high. In particular, in the six central wards such as Chiyoda, Minato, and Shibuya, there are successive cases where the selling price for a 70㎡ unit exceeds 100 million yen (approximately 940 million won).

Recently, wealthy foreigners and high-income domestic residents have been paying attention to high-end existing apartments that are less than 15 years old. This is because they can secure a location and quality similar to new builds while enjoying a certain price advantage.

The 'triple whammy' of supply shortages, rising material and labor costs, and labor shortages seems difficult to resolve in the short term. Furthermore, Chiyoda Ward in Tokyo has requested the industry to limit the resale of new condominiums for five years to curb speculation. Such strengthened regulations are further highlighting the relative attractiveness of the renovated apartment market.

Tokyo's renovated apartment market is no longer just an alternative to supply shortages but is evolving into a systematic business model. Specialized companies like Stamika Holdings and Intelex acquire apartments that are 15-25 years old, renovate them in an average of 117 days, and then resell them. Such apartments are traded at prices 20-45% higher than unrenovated apartments. Major developers like Mitsubishi Estate and Takara Leben are also pursuing both new construction and renovation projects, while platform companies like Cowcamo and Renoveru are segmenting the market by targeting design-conscious young buyers.

The key to renovation investment lies in strategic value improvement, not just simple repairs. Foreign investors, in particular, are employing strategies that target high-income tenants and overseas second-home demand by incorporating modern spatial design, energy-efficient facilities, and smart home features. For example, in Minato Ward, an apartment with an upgraded kitchen featuring high-end countertops and premium appliances sold for 12% higher than a comparable unrenovated apartment in the same location.

In Japan, foreign ownership of real estate is unrestricted, and the weak yen offers a significant price advantage to foreign currency asset holders. The government's policy of expanding foreign investment also enhances the appeal of the renovation market.

Of course, not all renovated apartments have investment value. Detailed due diligence and analysis are essential, including whether they meet earthquake resistance standards, the status of management fee reserves, the condition of common areas, and the completeness of the renovation design. Ultimately, only a "well-renovated home," not just a "repaired home," can command a premium in the market. Furthermore, potential institutional changes, such as the resale restrictions proposed in Tokyo's Chiyoda Ward, must also be considered.

Tokyo's renovated apartment market is now establishing itself not just as a substitute but as an independent investment sector. Amidst supply constraints, strengthening regulations, and lifestyle changes, this market is evolving with greater sophistication. For strategically minded investors, it can be a better option than new construction. The structure that allows a price difference of up to 36% compared to new builds to be converted into a premium is certainly a noteworthy opportunity.

While everyone is currently focused on new construction, seizing the new opportunity of renovating existing buildings could be a step ahead. If the market has changed, the answers must also change. Now is the time to pay attention to new homes under the name of "renovation."

<Korea Economic The Moneyist> Kim Yongnam, CEO and President of GlobalPMC Co., Ltd.