The most perplexing part of writing about housing in Japan is the mass media’s fixation on Tokyo. As we’ve said in this blog many times before, Tokyo is distinct from the rest of Japan when it comes to real estate, and while trends in the capital can often be extrapolated to cover Japan as a whole, many specific aspects don’t apply, the most obvious one being that people who own or are looking to buy property in Tokyo can expect at least some return on their investment, if not always an actual profit; whereas those who live in the rest of Japan, not counting certain regional urban centers, cannot. Even the akiya (vacant housing) probem is different in Tokyo. There are akiya there—quite a few, in fact—but they have not been completely abandoned, which is often the case in the suburbs and the countryside. Sometimes their owners are just waiting for the right opportunity to sell and sometimes there are financial obstacles involved, such as a failure to pay property taxes or inheritance issues. But the land will always be worth something, and that isn’t necessarily true elsewhere.

Consequently, the big real estate news in recent months has been the skyrocketing value of Tokyo real estate, in particular, that of new condominiums. The average price of a condominium in the 23 wards has now breached the ¥100 million mark, thanks mainly to the fact that brand new condos at the high end of the price spectrum sell out almost immediately. According to the land ministry, if the average price index were set at 100 in 2010 for condos throughout Tokyo prefecture, it would be 190.1 as of April of this year. In contrast, new house prices in Tokyo would only be 125.6 as of April 2023. The main accelerant is the rash of ultra-luxury apartments that have gone on sale in the central wards. The average price of a condo in the newly opened 65-story Azubadai Hills is ¥2 billion, with the top price reaching ¥20 billion. And they’ve all been sold. According to one real estate research company, in July, 1,542 newly built condos went on sale in the 23 wards. The average price was ¥134 million, and only 20 percent of them could be had for less than ¥70 million. Moreover, 93 percent of the units priced above ¥100 million have been sold, but that’s true of only 64 percent of the units priced between ¥80 and ¥100 million. 

Tokyo real estate values have always been supported by people of means, but it should be noted that the average income nationwide has not increased at all in the last 20 years. In fact, it’s now going down. The tax agency reported that the average income was ¥4.61 million in 2020. The following year it dropped to ¥4.43 million. This means the real estate gap in Tokyo is getting wider all the time, and pretty soon only very wealthy people will be able to live in the center of the city. 

This intelligence is certainly newsworthy, but the amount of obsessive detail that has gone into the story in the mass media has precluded what such economic shifts mean for the rest of us who don’t live in Tokyo and don’t make even the average income cited. There is very little. One example of this kind of reporting is a Yahoo! News special report posted Nov. 4 about the Tokyo condo boom and how hard it has been on two-income households that make less than ¥15 million a year. It is not a schadenfreude-fueled piece, but rather a serious study of how the condo boom has adversely affected the fortunes of those who get by at the lower end of the upper middle class. 

The main adverse effect is that people looking for a new condo in the city center “are having to reevaluate their criteria” for selection. The male half of one couple profiled is a 31-year-old regular employee of an IT company. He and his wife have been married three years and have a two-year-old baby. His wife is a regular employee for a trading company. Their combined income is about ¥13 million a year. Previously, they rented an apartment in the northern part of Tokyo, near the wife’s parents’ home. From there, the husband could get to work in Chiyoda Ward by taking only one train. 

Their budget was ¥70 million, which is within their reach. However, their criteria made it difficult. Since they plan to have another child, they need at least 70 square meters, and they insist that the condominium be new. Because of the convenient commuting circumstances, they would like to remain in the northern part of Tokyo. However, when they looked for a new condo there they could not find one for ¥70 million or less. In the end, they found what they wanted near Machiya Station on the Chiyoda subway line, which is not technically in northern Tokyo, but still within 30 minutes’ commuting time to the husband’s office. (The article implies that another reason they wanted to stay in northern Tokyo was to remain close to the wife’s parents, who could help with child-rearing duties.) 

The search took six months, which doesn’t sound that bad, so the question I have is: What is it about this couple’s story that is supposed to come across as “difficult.” It sounds to me as if they’ve got it made. Further reading reveals the financial particulars. They did not make a down payment, and the loan is split between the two spouses—¥50 million for the husband, ¥20 million for the wife. That also sounds doable, though, obviously, the couple will be in debt up to their necks for the rest of their lives. However, the area where they bought the condo is undergoing redevelopment, so the value of their property should at least remain stable, though it may not increase. And yet, the husband complained, “We would still rather live closer to work, but the higher prices are prohibitive.” This, apparently, is what the reporter means when he says more people looking for a condo “are forced to change their plans.”

One change that seems to be general, according to one real estate expert interviewed for the article, is that buyers are now changing the definition of what they can afford. In the past, the conventional wisdom was that you didn’t purchase a home that cost more than five times your annual salary, but the expert says the standard now is 7 to 8 times, which means if you have a household income of ¥10 million, you can’t afford anything over ¥70 million. But that takes for granted the idea that interest rates and current economic conditions (including one’s job) won’t change in the future. 

The situation for new single-family houses is not that much different, but availability has become less. In 2014, new houses comprised 19.6 percent of properties in the 23 wards that went on sale, while in 2022 the portion had dropped to 10.1 percent. In the suburb of Saitama Prefecture, meanwhile, the portion had gone up during the same period. That isn’t to say demand for new houses had gone down in Tokyo, only that prices had increased, thus persuading new-house buyers to look outside the city. 

The article profiles a civil servant in his late 30s who bought a new house in Suginami Ward in June 2021. His wife works for a listed company and together their household income is about ¥12 million. Previously they lived in a family residence for public workers in the western part of the 23 wards. They have two children, the older of whom is in daycare. When they decided to buy a house the main criterion was location: Both work in the center of Tokyo and would need to be able to drop off and pick up their kids at daycare facilities for the time being, which means they should be immediately available in case of an emergency. The commute shouldn’t be more than 30 minutes.

They inspected many properties, including existing houses on sale, condominiums, and vacant land. The prices within the Yamanote Line were out of their range, and they finally settled on a new house near Koenji Station, which is only 10 minutes by train from Shinjuku. The price of the land was ¥55 million and the house itself ¥30 million. Since the land is only 100 square meters, the house is three stories. It’s located 15 minutes by foot from Koenji Station, which they decided was “tolerable.”

They put ¥10 million down, and, as with the above-mentioned couple, each spouse took out a loan to cover the remaining ¥75 million over 35 years with a variable interest rate of 0.37 percent. In the end, they pay ¥190,000 a month for their mortgage. They do not have a whole lot of money left over each month after expenses. The husband told the reporter that they “are not financially comfortable” because of this situation, “but overall we think we made the right choice,” mainly because the circumstances surrounding their children—proximity to schools and general environment—are good. When told that there was a possibility that the house might have been cheaper had they waited 5 years, they said even in that case they would have bought it when they did because 5 years is a long time when raising children. Also, they figure that they can always sell the house easily when they get older, after their children leave, and then use the money to buy a condo for themselves. One of the reasons they chose Suginami is that land values are not likely to decline (it actually appreciated year-on-year in 2021 by 4 percent), so even if the value of the house itself goes down to zero after 30 years, they can still get ¥55 million for the land. 

The reasons new houses are so expensive right now are a shortage of labor and an 28 percent increase in materials costs over the last two years. These conditions are likely to stay the same for the near future, which means it will become even more difficult to buy a new house in Tokyo. 

And yet demand for housing in the center of Tokyo, whether house of condo, has never been more competitive, owing to the wealth disparity. The rich are getting richer and are buying up properties, even if they don’t plan to live in them. Average incomes in the central five wards have increased substantially since 2013. In Shibuya it went from ¥7.02 million to ¥10 million in 2022. In Chiyoda, from ¥8.48 million to ¥10.77 million. In Minato, from ¥9.1 million to ¥14.7 million. And as already mentioned, the average income throughout Japan declined during this same period. In many of these cases, a household contains two salaried workers. According to a survey by the interior ministry, 72 percent of women who earn incomes of more than ¥10 million are married to men who also make more than ¥10 million; while women who make between ¥2 million and ¥10 million have husbands who make about the same. 

What this means for real estate prices in Tokyo is that the city center will continue to be very popular, while demand for housing elsewhere in the city will fluctuate. It will become increasingly difficult for households that make less than ¥10 million to afford to buy a property in central Tokyo, which means they will have to go farther afield to live and that means buying properties that may be more difficult to sell in the future. These issues will become more pronounced as the population decreases and the income gap widens, thus leading to greater class differences. Central Tokyo will become a kind of ghetto of the ultra-wealthy. Real estate reporters do cover the situation in other parts of Japan, where the vast majority now live and will live, but not nearly as intently. If you’re going to cover Tokyo, frame it as the exception rather than the rule.