Tokyo condo market remains resilient amid tight supply

Record prices supported by strong fundamentals

Condominium prices across Tokyo’s 23 wards continue to reach record highs, underpinned by resilient demand and persistent supply constraints, according to Savills Japan. Despite a recent moderation in sales momentum, the underlying fundamentals of the market remain solid, reinforcing price resilience across the city.

Demand is supported by steady population growth, accommodative financing conditions and improving household incomes. Consecutive years of strong wage outcomes from Japan’s annual Shunto negotiations have further enhanced purchasing power, helping to sustain buyer interest even at elevated price levels.

Shrinking new supply tightens Tokyo market conditions

At the same time, new condominium supply continues to contract. Savills attributes this trend to rising land, construction and labour costs, as well as the limited availability of land zoned for residential use. Competition from developers focusing on other asset classes has also reduced the number of new residential launches, intensifying supply-side pressures.

Demand has been particularly strong in the central five wards, where condominiums remain highly sought after by high-net-worth individuals and foreign buyers. These centrally located properties are increasingly viewed not only as primary residences but also as long-term investment assets and second homes, given their scarcity and value preservation potential.

Spillover demand supports peripheral wards

Looking ahead, Savills expects spillover demand from the central districts to increasingly support price growth in the outer wards of Tokyo’s 23 wards. Rising net migration into family-friendly areas is likely to benefit larger residential units, appealing to households seeking more space at relatively lower price points.

This shift is broadening the base of demand beyond the city’s core, helping to sustain price growth across a wider range of locations within Tokyo.

Japan Rental expansion and policy considerations

As rising prices push some potential buyers out of the ownership market, further expansion of the rental sector is anticipated. Residents are reassessing purchase plans and opting to rent for longer periods, while continued positive net migration — driven largely by foreign nationals — is expected to underpin rental demand and capital values.

Although average contract rates for new condominiums across the 23 wards have moderated to around 63% as of the third quarter of 2025, down from a three-year average of 68%, prices are expected to remain elevated due to tight supply and strong demand fundamentals.

Policy developments could influence near-term sentiment. Savills notes that newly appointed Prime Minister Sanae Takaichi has announced plans to introduce measures aimed at curbing short-term speculative transactions. While such initiatives may encourage temporary caution among some investors, the broader outlook for Tokyo’s residential market remains positive.

As International Investment experts report: Tokyo’s condominium market continues to benefit from structural supply constraints, rising incomes and sustained international interest. Even with slower sales momentum, these factors are likely to preserve price stability and long-term investment appeal across the city’s residential sector.