Structural Shift and Investment Risks in Tokyo's Doubling Property Prices

The recent surge in Tokyo housing prices has surpassed ordinary market fluctuations, forming a structural turning point. Over the past five years, the price of second-hand homes in Tokyo's 23 wards has doubled from about 55 million yen to 115 million yen, while in the core six central wards, it has soared from 75 million yen to 179 million yen, a 2.4-fold increase. This round of price hikes has pushed Tokyo housing prices to their highest level in 28 years.

Question

What are the reasons for the rapid rise in Tokyo housing prices?

AIAIGAnswer

First, the sharp decrease in new housing supply has driven many buyers to the second-hand market, while the increase in high-priced properties has raised the overall average price. Additionally, rising apartment rents in Tokyo have encouraged more people to choose buying over renting, and these factors together have contributed to the surge in housing prices.

Question

What are the potential risks of entering the Tokyo real estate market currently?

AIAIGAnswer

Experts warn that a price adjustment period may occur in 2026, and current prices might already be at a cyclical high. Furthermore, rising loan costs due to interest rate hikes by the Bank of Japan, as well as annual holding costs such as fixed asset taxes and management fees, need to be considered. These factors require investors to assess more carefully when entering the market at this time.

In summary, if you are planning to live in Tokyo long-term or preparing for your child's study abroad, purchasing a property at the current price is still reasonable. However, if it is purely for investment profit, you need to carefully consider the high risks after a five-year doubling and the potential future correction period.

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