Various news articles the world over reported on city dwellers fleeing the confines of their urban life in the midst of the pandemic to more regional escapes as large companies became more flexible on remote work arrangements. Tokyo was no stranger to those clickbait articles. And while the stories might be true for some major international cities, buyer behavior in Tokyo shows a less sensational and more grounded reality.
In short, buying behavior does not appear to have shifted in Tokyo, based on sales data reported by REINS and the Real Estate Economic Institute. We can dispel some myths below.
Are buyers considering apartments further from the station now that they don’t have to commute as often?
Apartment buyers in the Tokyo area and surrounding prefectures tend to place a high preference on walking distance to the nearest train station, whether that is an above-ground or subway train line. Anything under 10 minutes is preferred, and under 7 minutes is ideal, with properties over a 10-minute walk considered somewhat ‘far’.
Back in 2010, 63.1% of all second-hand apartments sold across greater Tokyo (Tokyo, Kanagawa, Saitama, and Chiba Prefectures) were within a 10-minute walk of the closest train station, and 26.3% were an 11 ~ 20-minute walk. Apartments that required taking a bus to get to the train station represented 9.6% of transactions.
In 2020, when we were in the grip of the pandemic and the abrupt change it brought to our lifestyles, 67.2% of all second-hand apartments sold were within a 10-minute walk from the station, while 24.3% were an 11 ~ 20-minute walk away. The bus-to-train properties accounted for 7.3% of transactions. In other words, closeness to the nearest train station in 2020 was more important than it was a decade ago.
Perhaps buyers are moving a few stations away and having a longer commute?
Buyers also do not appear to be buying apartments much further outside of the city center. For a second-hand apartment sold in 2020, the average distance in kilometers from Tokyo Station, based on train track distance, was 22.6 km. In 2010, the average distance was 24.4 km – that’s a distance of 200 meters (two FIFA football fields).
Buyers must be purchasing larger apartments, right?
The anecdotes we hear are that renters may be making the plunge into purchase a home or apartment thanks to low borrowing costs, and that home or apartment may be larger than their current rental property. In that respect, they may be upgrading from a smaller rental apartment to buying something a little larger. But, the average apartment itself is not getting larger. Apartments in Tokyo and around Japan tend to be small. The standard size of a three-bedroom apartment is around 70 sqm.
Apartments in Japan are usually priced per square meter, and every extra inch counts (and costs). Developers are hesitant to build larger apartments because they have to pass the higher construction costs onto the buyer in the form of higher prices, and those higher prices might not always be met with adequate demand, especially in suburban areas that lack the luxury buyer segment. To make up for the lack of space in cramped apartments, developers have been looking for workarounds such as converting closets into tiny studies or creating co-working spaces in the communal areas. A former broom closet in the hallway might now be marketed as a home office for a remote work lifestyle.
About the data:
It is important to point out that this data is based on second-hand and brand new apartment sales, not rental transactions, and that Tokyo’s population has shrunk only mildly. It is possible that the rental market is seeing different dynamics at play as fewer university students, typical renters of smaller, studio apartments, are moving in to start school semesters. Part-timers and other contract workers in the hospitality industry, also typically renters, may have moved out due to job cuts. We may also see different data reported next year as the pandemic continues in 2021. Remote work has not taken off as wildly as some reports suggest, with not all jobs able to be performed remotely and not all companies willing or able to do so.
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