Apartment rent and age in Tokyo

According to the Real Estate Economic Institute, the average price of a brand new apartment in greater Tokyo was 49,290,000 Yen in 2013, up 8.6% from the year before and higher than the average of 47,750,000 Yen seen during the ‘mini bubble’ in 2008. Sales of apartments priced over 100 million Yen have also increased, as has investment from domestic and foreign funds.

Apartment rent, however, has not shown the same trajectory. According to Tokyo Kantei, the average monthly rent of a family-sized apartment less than 5 years old in Tokyo’s 23 wards was 4,007 Yen/sqm in June 2014, up 9.2% from the previous year. For apartments between 6 ~ 10 years old, the average monthly rent was 3,461 Yen/sqm, showing almost no change from 12 months prior. For apartments aged between 21 ~ 30 years old, average rents dropped by 2.6% to 2,496 Yen/sqm, while rents for apartments over 30 years old had fallen by 0.5% to 2,616 Yen/sqm. Masayuki Takabashi, a researcher from Tokyo Kantei, said that the recent increase in the consumption tax rate has reduced the real income of consumers, which has made conditions difficult for landlords who want to achieve strong rental returns.

While the average rent of apartments less than 5 years old has jumped by over 9% over the past 12 months, this does not necessarily mean that demand has also increased. The rise in the rent of relatively new apartments is an exception to the current rental market. Since 2012, it has become more common to see apartments offered for rent as soon as a new condominium is completed. This is due to a growing number of investors purchasing apartments to help lower their inheritance tax burden before a revision to inheritance tax deductions is implemented in 2015.

The rent of a brand new apartment is always higher than normal market levels. With a larger number of near-new buildings hitting the rental market, the average has been pulled up.

‘While you might assume that the strong growth in the market rent for relatively new apartments indicates a strengthening economy, the real indicator of market conditions is more likely to be reflected in the market for older apartments’ remarked Takabashi.

Source: Toyo Keizai, August 2, 2014.

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