News reports are still coming out about an exodus from Tokyo as the coronavirus pandemic continues, but has this had any effect on the real estate market in Tokyo’s 23 wards?
Let’s take a look by comparing quarterly transactions over the past two years with those in 2019, pre-pandemic. The rental market is seasonal, with the first quarter of the year typically the busiest season as many people typically moving for work or school will do so before the start of the new work or school year on April 1.
2020 was a year of disruptions as we were experiencing the pandemic for the first time. The first state of emergency that took place in April and May in 2020 saw many businesses and real estate agencies temporarily close their doors. Transactions in the second quarter of 2020 dropped significantly as a result of everyone staying at home. After that, businesses resumed operations and there have been no further voluntary shutdowns since. In the second quarter of 2021, transactions in Tokyo’s 23 wards were on par with those of 2019. In the fourth quarter of 2021, transactions exceeded those of 2019.
You might expect tenants moved away from the city center to the suburbs where they had more open space, cheaper rent, and larger housing. Not so fast…
For Saitama Prefecture, reported rental transactions in 2021 have continued to fall below 2020 and 2019 levels. In the second and third quarters of 2021, transactions were down 21% from 2020. In the fourth quarter, they were down 12% from 2020 and 28% from 2019.
This must be an anomaly, right? Well, Chiba Prefecture didn’t do much better. In 2021, transactions were below 2020 levels for three out of four quarters and in the last quarter of 2021 are still 13% below the level seen in 2019.
Yokohama and Kawasaki cities have also seen a year-on-year drop in transactions in three out of four quarters in 2021.
Rents must have fallen dramatically since the start of the pandemic, no?
No. The data shows rents have remained fairly stable over the past two years. In Tokyo’s 23 wards, the average rent in the fourth quarter of 2021 was up 3.1% from the first quarter of 2019. Chiba Prefecture and Yokohama/Kawasaki Cities also saw 3%+ growth over the same period. Saitama Prefecture has seen rents fall by a minuscule 0.2%.
Rents tend to be quite static in Japan due to residential rental laws that favor tenants. Asking for rental increases during a tenancy is a rare thing to do and a tenant does not need to agree. They can continue paying the rent set in their original lease terms. If market conditions have changed to a point where a rental increase may be warranted, but the tenant does not agree, the case may need to go to the district court where the court will agree on a fair rent. The tenant may do the same if rents have fallen.
Are tenants renting larger apartments?
Again, the data does not show any noticeable trend for larger apartments. In Tokyo’s 23 wards, the average apartment size has ranged from 31.28 ~ 34.32 sqm over the past three years. It hit a peak in the 34 sqm range in the second and third quarters of 2019.
In Saitama Prefecture, average apartment sizes have ranged from 38.30 ~ 40.90 sqm throughout 2021, showing little change from 2020 (38.05 ~ 40.73 sqm) and 2019 (38.67 ~ 40.98 sqm).
In Chiba Prefecture, the average apartment size in the fourth quarter of 2021 was 39.26 sqm, down from 42.06 sqm in 2020 and 40.73 sqm in 2019.
About the data:
This data is based on rental transactions for mansion-type apartments (as opposed to ‘apaato’ types) voluntarily reported to the REINS database, a multiple listing database accessible by licensed realtors. Not all transactions are reported, but it is a useful tool to see market movements.
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