Tokyo Apartment Market Outlook for 2025 [Kim Yongnam's Real Estate Asset Management]

According to a report from the Japan Center for Economic Research, reported by Nikkei Asia, the supply of new apartments in Tokyo is expected to increase for the first time in four years in 2025. However, it remains uncertain whether this will lead to market stabilization.

Supply Increases, but Remains Insufficient

The supply of new apartments in Tokyo for 2025 is projected to be around 26,000 units, a 13% increase from 2024. However, this is merely a rebound from the all-time low of approximately 23,000 units in 2024. Furthermore, as developers shift their strategy to post-completion sales to reduce unsold inventory risk, the actual volume of units hitting the market could be even smaller.

Will Prices Continue to Rise?

The average price of a new apartment in Tokyo's 23 wards reached 112.8 million yen in 2024, and this high-price trend is expected to continue into 2025. Steady demand from dual-income couples working in the city center and high-income individuals with assets is supporting these prices. In contrast, the situation is different in the outskirts of Tokyo. While price increases are moderate, a sharp rise in construction costs is eroding the profitability of developers. This makes new development in outlying areas difficult.

A New Alternative: Land-Leasehold Apartments

In 2025, approximately 2,000 units of land-leasehold apartments are scheduled to be supplied. These are 20-30% cheaper than regular apartments and are expected to be a realistic alternative for first-time homebuyers. However, they have limitations, such as the requirement to return the land after the lease period and the difficulty of expecting an increase in asset value.

What Are the Strategies for Overseas Investors?

Overseas investors interested in the Tokyo apartment market in 2025 should consider the following points. First, they must carefully choose their investment timing based on exchange rate fluctuations amid the weak yen. Second, while properties near train stations in central Tokyo are expected to have stable rental demand, the large initial investment amount must be taken into account. Third, it is necessary to review investment opportunities in expanded station areas, considering the transportation infrastructure developed after the Tokyo Olympics.

Increase in Purchases by Foreign Investors Expected

In the 2025 Tokyo apartment market, an increase in purchases by foreign investors is anticipated. With the yen's depreciation continuing, interest from investors in Asian countries such as China, Singapore, and Hong Kong is growing. Global real estate investment firms seeking stable rental income are also paying attention to the Tokyo apartment market. The proportion of foreign investment, which has been steadily increasing in recent years, is expected to expand further in 2025.

In conclusion, the Tokyo apartment market in 2025 is likely to remain a seller's market, even with a slight increase in supply. Demand for premium residential facilities is expected to be robust, and the success of new housing models like land-leasehold apartments will be a key point to watch.

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