The Real Reason the World's Wealthy Are Flocking to Tokyo [Kim Yongnam's Real Estate Asset Management]

Tokyo's luxury real estate market has been showing unusual signs recently. A penthouse (625㎡) in Marc Omotesando One, developed by the Swedish private equity fund EQT, was sold for 9.5 billion yen (approximately 90 billion won), breaking the record for the highest price per 3.3㎡ (pyeong) in Japan. This penthouse features four bedrooms, a spa room, a terrace, a private rooftop and pool, a dedicated elevator, and 24-hour concierge service. Such a record-breaking transaction clearly shows that Tokyo's luxury residential market is emerging as a new 'safe asset' and 'investment destination' for the global wealthy, going beyond being just a living space.

The price increase in Tokyo's luxury real estate market is steep. Before the COVID-19 pandemic, the price per 3.3㎡ was relatively low, but in 2024, demand for both new and resale homes surged, putting it on par with the global market. In the five years leading up to June 2024, prime real estate prices in Tokyo rose by more than 50%.

The penthouse at Marc Omotesando One was traded for over 50 million yen per pyeong, and the Aman Residences penthouse at Azabudai Hills was reportedly sold in 2023 for 20 billion yen, at over 30-40 million yen per pyeong. Homes supplied in 2023 or earlier were resold in 2024 at a premium of over 50% compared to their original prices. Some are estimated to have been traded for over 70 million yen per pyeong. This trend has continued into 2025, with several homes selling in the 30 million yen per pyeong range in January and February, and asking prices for some luxury properties exceeding 40 million yen per pyeong in March.

Several factors are contributing to this price surge. First, most of Tokyo's luxury real estate is pre-sold years before completion, often at prices set before the COVID-19 pandemic or asset inflation. This has led to many cases of properties being traded at high premiums in the market.

Second is the increasing proportion of foreign investors. The ratio of foreign investors in Tokyo's luxury housing market has risen to 27%, up from 21% five years ago. The influx of capital from Asian countries like Singapore, Hong Kong, and South Korea, as well as from North America and Europe, is strengthening Tokyo's international standing. Although this is lower than London (45%) and New York (20-32.4%), considering Tokyo's stability and growth potential, the proportion of foreign investment is likely to increase.

Third, the sharp rise in land prices and construction costs is driving up prices across the market, with land prices in central areas having increased significantly in recent years.

Fourth, the weak yen is providing an attractive entry opportunity for overseas buyers, creating a substantial discount effect.

One of the key growth drivers for Tokyo's luxury residential market is the steady increase in ultra-high-net-worth individuals (UHNWIs). As of 2023, Japan had over 16,500 UHNWIs nationwide, with about 6,500 in Tokyo, an increase of over 10% from the previous year despite the weak yen. The number of UHNWIs in Tokyo is expected to grow by more than 10% annually from 2023 to 2028. In the Asia-Pacific region as a whole, there were over 160,000 UHNWIs as of 2024, with a projected growth of nearly 50% by 2028.

These individuals see Japan not just as a place to live, but as a reason for asset storage and investment due to its economic stability, high level of public safety, and unique cultural appeal. Especially in a time of growing global uncertainty, Japanese real estate serves as an inflation hedge and a safe-haven asset. The fact that prices of traditional luxury properties like Toranomon Tower Residence and Roppongi Hills Residence have doubled or tripled over the past decade demonstrates this value.

Tokyo's luxury housing market has a very limited supply. Almost no new supply of major luxury homes is expected until 2030, which, combined with rising demand, is a key factor fueling price increases. The difficulty of securing land and high construction costs are also a major burden for developers.

Furthermore, the recent surge in inbound tourists is another important driver for the luxury real estate market. In 2024, Japan recorded a record 37 million visitors and is targeting 60 million by 2030. The influx of wealthy tourists is particularly increasing, and there is a high probability that they will convert into luxury home buyers. In fact, many luxury homes in Tokyo are reportedly owned by high-ranking foreigners as vacation homes.

Tokyo's luxury residential market appears to be just entering the initial stages of growth. The synergistic effects of supply constraints, the increase in UHNWIs, economic stability, the weak yen, and inbound tourism are seen as factors that will support the market's continued growth. By 2030, the price per 3.3㎡ is expected to reach 50-60 million yen.

Beyond being a simple investment destination, Tokyo's luxury residential market, offering the appeal of a safe and culturally rich place to live, is expected to establish itself as an important strategic asset in global wealth management going forward.

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