Japan Real Estate Market 2025: Complete Guide to Property Investment Under New Prime Minister Sanae Takaichi

Japan's real estate market enters a transformative phase in 2025 with the election of Sanae Takaichi as the country's first female prime minister. This comprehensive guide analyzes how Takaichi's economic policies, fiscal stimulus plans, and immigration reforms will impact property prices, rental yields, foreign investment opportunities, and housing market dynamics in Tokyo, Osaka, and beyond.

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Key Takeaways

Property prices in Tokyo rose 12.62% year-over-year in July 2025, with new condominiums averaging ¥93.96 million ($640,000)

Foreign investors now account for 27% of all Japanese real estate transactions, up 18% from 2024

Bank of Japan interest rates expected to remain low under Takaichi's reflationary economic policies

Housing supply constrained with starts down 7.8% due to labor shortages and new energy standards

Rental yields rising faster than official statistics show, with Tokyo asking rents up 8% annually

Investment opportunities strongest in prime urban districts like Minato, Shibuya, and Chiyoda wards

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Who is Sanae Takaichi?

Political Background

In October 2025, Sanae Takaichi became Japan's first female prime minister after winning the Liberal Democratic Party (LDP) leadership race. A long-time conservative and protégé of former premier Shinzo Abe, Takaichi brings a distinct economic vision focused on expansionary fiscal policy and crisis-management investment.

Key Policy Positions

Policy Area	Stance	Market Impact
Fiscal Policy	Large government spending, increased subsidies	Positive for construction and infrastructure sectors
Monetary Policy	Opposes rapid BOJ rate hikes	Low mortgage rates continue
Taxation	Plans to cut consumption tax	Increased consumer purchasing power
Immigration	Tighter enforcement, but recognizes need for foreign workers	Mixed impact on labor supply
Foreign Investment	Increased scrutiny, but no outright restrictions	More due diligence required
Infrastructure	Crisis-management investment in semiconductors, energy, defense	Boost to urban development projects

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Economic Policy Overview

Abenomics 2.0: Takaichi's Reflationary Agenda

Takaichi's economic platform represents an updated version of Abenomics with several key components:

Demand-Driven Inflation Strategy

• Wages should rise first, then prices follow
• Bank of Japan should maintain accommodative monetary policy
• Government investment in strategic sectors creates growth cycles

Crisis-Management Investment Sectors

• Food security and agriculture
• Energy independence
• Semiconductor manufacturing
• Biotechnology and healthcare
• National defense systems

Interest Rate and Inflation Outlook

Bank of Japan Rate Expectations (2025)

According to CBRE investor surveys:

• 78% of investors expect BOJ rate hikes less than 50 basis points in 2025
• Central bank likely to remain cautious given Takaichi's reflationist stance
• Mortgage rates expected to stay historically low through 2025-2026

Inflation Dynamics

• Consumer price inflation: 2.7% (August 2025)
• Real rent growth: 0.5% officially, but asking rents rising 8% in Tokyo
• Yen weakness raising import costs but improving export competitiveness

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Real Estate Market Performance 2025

National Property Price Trends

Residential Property Price Index (May 2025)

Property Type	Year-over-Year Change
Overall Residential	+3.74%
Condominiums	+8.28%
Land	+2.33%
Detached Houses	+0.52%

Tokyo Real Estate Market Analysis

Condominium Prices in Tokyo (July 2025)

Metric	Value	Year-over-Year Change
Existing Condos	-	+12.62%
New Condos	¥93.96M ($640K)	+20%+
Secondary Market Volume	Increasing	Strong buyer demand

Tokyo vs Osaka Price Comparison

• Tokyo average: ¥93.96 million ($640,000)
• Osaka average: ¥58.13 million ($395,000)
• Price gap: 62% premium for Tokyo properties

Rental Market Dynamics

Tokyo Rental Rates by Unit Size (2025)

Unit Size	Monthly Rent (¥)	Monthly Rent (USD)	Annual Increase
Studio (<30m²)	¥103,952	$704	7-11%
1-2 Bedroom	¥150,000-250,000	$1,016-1,693	7-11%
Large (>70m²)	¥392,192	$2,657	7-11%

Rental Inflation Trends

• Official real rent growth: 0.5% (existing leases)
• Asking rents in Tokyo's 23 wards: +7.99%
• Asking rents in Osaka city: +4.82%
• Gap reflects sticky existing leases vs. market rates

Housing Supply Constraints

Construction Activity (January-July 2025)

• Housing starts: -7.8% year-over-year
• Forecast for fiscal 2025: 780,000 units
• Key constraints:
  • Rising material costs
  • Labor shortages (skilled workers)
  • New energy-saving standards (April 2025)
  • Delivery delays by major construction firms

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Foreign Investment Climate

Foreign Capital Inflows

Investment Volume and Growth

Metric	2024 Value	Growth
Foreign Investment in Residential	¥740B ($5B)	+18% YoY
Foreign Share of Total Transactions	27%	Increasing
Central Tokyo New Apartments Sold to Foreigners	20-40%	High demand

Geographic Distribution of Foreign Investors

Region	Share of Foreign Investment
North America & Europe	68%
Singapore	Growing
Hong Kong	Growing
South Korea	Growing

Investment Sentiment Under Takaichi Administration

CBRE 2025 Investor Survey Results

• 50% expect multifamily property prices to rise (up from 25% in 2024)
• 87% plan to maintain or increase acquisition volumes
• 78% expect BOJ rate hike <50 basis points
• Investors increasingly optimistic about rent increase negotiations due to rising wages

Currency Advantage for Foreign Buyers

Weak Yen Benefits

• Japanese assets remain attractively priced in foreign currency terms
• Relatively high yields compared to other developed markets
• Currency weakness enhances returns for overseas investors
• Exchange rate volatility creates entry point opportunities

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Short-Term Market Forecast (2025-2026)

Property Price Projections

Expert Forecasts

Source	Nationwide	Tokyo	Timeframe
Fitch Ratings	0-2%	-	2025
Mitsubishi UFJ Trust	-	5-6%	2025 (after 8% in 2024)

Price Growth Drivers (2025-2026)

1. Constrained supply due to construction slowdown
2. Low interest rates under reflationary policy
3. Weak yen attracting foreign investment
4. Urban concentration in Tokyo, Osaka, Nagoya
5. Secondary market demand as new condos become unaffordable

Mortgage Rate Environment

Financing Conditions

• Historical low mortgage rates continue
• Takaichi's opposition to rapid BOJ tightening
• Window of opportunity for buyers to lock in rates
• Variable rate mortgages remain attractive short-term

Market Risks to Monitor

Potential Headwinds

• Delayed rate normalization could weaken yen further
• Higher import costs from currency depreciation
• Consumer inflation impacting affordability
• Sharp, unexpected monetary tightening
• Immigration policy changes affecting labor supply

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Long-Term Outlook (2027 and Beyond)

Demographic Challenges

Population Trends

Metric	Value	Implication
Nationwide Vacant Homes	9 million	13.8% vacancy rate
Tokyo Vacancy Rate	2.6%	Tight urban market
Tokyo Net Migration (2024)	+79,285 people	Urban concentration continues
Rural Areas	Declining	Regional oversupply risk

Structural Reform Priorities

Policy Areas Requiring Attention

1. Zoning and Land-Use Reform

   • Rigid height restrictions limit urban supply
   • City center development constraints
   • Need for regulatory modernization

2. Vacant Home Management

   • Incentives for renovation or demolition
   • Regional revitalization programs
   • Tax reforms for abandoned properties

3. Energy Efficiency Standards

   • April 2025 regulations raising construction costs
   • Green building incentives needed
   • Balance between sustainability and affordability

Long-Term Price Outlook

Market Segmentation

Market Segment	Long-Term Outlook	Key Factors
Tokyo Core Districts	Moderate growth (3-5% annually)	Foreign demand, urban jobs, limited supply
Osaka & Nagoya	Modest growth (2-4% annually)	Regional economic strength
Secondary Cities	Flat to declining	Population loss, oversupply
Rural Areas	Declining	Depopulation, high vacancy rates

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Guide for Foreign Buyers

Can Foreigners Buy Property in Japan?

YES - Foreigners can purchase property in Japan without restrictions on ownership. However, several practical considerations apply:

Purchase Process for Foreign Investors

Step-by-Step Buying Guide

1. Property Search & Selection

   • Use English-speaking real estate agents
   • Focus on liquid markets (Tokyo, Osaka)
   • Consider proximity to expat communities and international schools

2. Financing Options

   • Japanese banks typically require residency or local income
   • Foreign buyers often purchase cash or finance overseas
   • Mortgage rates currently at historical lows

3. Due Diligence Requirements

   • Expect increased scrutiny under Takaichi administration
   • Additional paperwork for foreign nationals
   • Sensitive locations (near military bases, farmland) face extra review

4. Legal & Tax Considerations

   • Hire bilingual legal representation
   • Understand acquisition tax, property tax, and capital gains
   • Consider holding structure (personal vs. corporate)

Best Areas for Foreign Investment

Prime Tokyo Wards for Investment

Ward	Characteristics	Typical Buyer Profile
Minato	International businesses, high-end residential	Expat professionals, wealth preservation
Shibuya	Young professionals, tech sector	Rental yield investors
Chiyoda	Central business district, government	Institutional investors
Shinjuku	Transportation hub, diverse housing	Balanced investors
Meguro	Residential, family-friendly	Long-term holders

Rental Market for Expat Landlords

Investment Considerations

• Tenant Pool: Growing expat community in Tokyo
• Vacancy Risk: Very low (2.6%) in prime districts
• Rent Growth: 7-10% annually for new leases
• Management: Professional property management recommended
• Furnishing: Unfurnished standard, but furnished commands premium

Regulatory Environment Changes

What Foreign Buyers Should Monitor

1. Visa and Immigration Policy

   • Takaichi's stricter enforcement rhetoric
   • Overstayer crackdowns may affect service workers
   • Business and skilled worker visas likely unaffected

2. Foreign Investment Screening

   • More paperwork expected
   • No sweeping restrictions anticipated
   • Strategic asset transactions under scrutiny

3. Building and Energy Standards

   • April 2025 energy-saving regulations
   • Renovation costs may increase
   • Green building premiums emerging

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Investment Strategies

Timing the Market: Buy Now or Wait?

Case for Buying in 2025-2026

Lock in historically low mortgage rates before normalization
Secure prices before further supply constraints bite
Weak yen provides favorable entry point for foreign currency
87% of institutional investors plan to maintain/increase purchases

Case for Caution

⚠ Prices already up significantly (Tokyo condos +20% YoY)
⚠ Potential policy changes under new administration
⚠ Long-term demographic headwinds
⚠ Regional markets face oversupply

Portfolio Positioning Strategies

Conservative Approach

• Focus on central Tokyo wards with proven liquidity
• Target mid-market condominiums (¥50-80M range)
• Prioritize rental yield over pure appreciation
• Diversify across 2-3 properties minimum

Aggressive Growth Strategy

• Pre-construction purchases in redevelopment zones
• Leverage low interest rates heavily
• Target luxury segment (¥100M+)
• Accept higher vacancy risk for appreciation potential

Value Investment Approach

• Secondary cities with economic catalysts
• Older buildings for renovation
• Off-market opportunities
• Longer investment horizon (10+ years)

Asset Class Comparison

Residential Investment Options

Asset Type	Typical Yield	Appreciation	Liquidity	Management
Studio Condos	3-4%	Moderate	High	Low effort
Family Units	2.5-3.5%	Higher	High	Moderate
Luxury Properties	2-3%	Variable	Moderate	High effort
Whole Buildings	4-6%	Lower	Low	High effort

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Expert Market Data Summary

Key Statistics for Investors

Price Performance Metrics

• Nationwide residential prices: +3.74% YoY (May 2025)
• Tokyo existing condos: +12.62% YoY (July 2025)
• Tokyo new condos: +20% YoY
• National condominium index: +8.28% YoY

Supply and Demand Indicators

• Housing starts: -7.8% (Jan-July 2025)
• Fiscal 2025 forecast: 780,000 units
• Tokyo net migration: +79,285 (2024)
• National vacancy rate: 13.8% (Tokyo: 2.6%)

Foreign Investment Flows

• Foreign share of transactions: 27%
• Foreign residential investment: ¥740B ($5B), +18% YoY
• North America/Europe: 68% of foreign capital
• Central Tokyo foreign buyer share: 20-40%

Rental Market Data

• Tokyo asking rents: +7.99% YoY
• Osaka asking rents: +4.82% YoY
• Official real rent growth: 0.5%
• Studio average (Tokyo): ¥103,952/month ($704)

Investor Sentiment

• Expect multifamily price increases: 50% (up from 25%)
• Plan to maintain/increase purchases: 87%
• Expect BOJ hike <50bp: 78%

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FAQ: Japan Real Estate Investment 2025

General Market Questions

Q: Is now a good time to invest in Japanese real estate?

A: The market presents compelling opportunities for 2025-2026, particularly for foreign investors. Low interest rates, constrained supply, and a weak yen create favorable conditions. However, Tokyo prices have risen significantly (+20% for new condos), so investors should be selective. Prime urban districts offer the best risk-adjusted returns, while regional markets face long-term demographic challenges.

Q: How will Sanae Takaichi's policies affect property prices?

A: Takaichi's reflationary economic policies should keep interest rates low through 2025-2026, supporting mortgage affordability and investor demand. Her crisis-management investment plans may boost construction and infrastructure sectors. However, tighter immigration enforcement could constrain labor supply and slow development. Overall impact is moderately positive for urban real estate in the short term.

Q: What returns can foreign investors expect?

A: Gross rental yields typically range from 2-6% depending on property type and location. Studio apartments in Tokyo yield 3-4%, while whole buildings can yield 4-6%. Capital appreciation in Tokyo core districts averages 3-5% annually long-term, with recent years seeing higher gains. Currency fluctuations significantly impact foreign currency returns.

Buying and Ownership

Q: Can foreigners buy property in Japan without living there?

A: Yes, Japan imposes no restrictions on foreign property ownership. Non-residents can purchase real estate freely. However, financing from Japanese banks typically requires residency or local income, so foreign buyers often purchase cash or arrange financing in their home country. Takaichi's administration may increase due diligence requirements, but ownership rights remain unrestricted.

Q: What taxes do foreign property owners pay?

A: Foreign owners pay the same taxes as Japanese nationals:

• Acquisition tax: 3-4% of assessed value
• Property tax: ~1.4% annually
• City planning tax: ~0.3% annually
• Income tax on rental income: Progressive rates up to ~50%
• Capital gains tax: 20% (short-term), 15% (long-term >5 years)

Q: How do I finance a property purchase as a foreigner?

A: Options include:

1. Cash purchase (most common for non-residents)
2. Japanese bank mortgage (requires residency/local income)
3. Home country financing (equity loan, portfolio margin)
4. Private lending (higher rates, more flexible)

Currently, Japanese mortgage rates are historically low due to Takaichi's reflationary policies, but access remains limited for non-residents.

Q: What is the typical process timeline?

A: Property purchase in Japan typically takes 1-3 months:

• Property search: 1-4 weeks
• Offer and negotiation: 1-2 weeks
• Due diligence: 2-4 weeks
• Closing: 1-2 weeks

Foreign buyers should add time for translation, international payments, and additional screening under the new administration.

Market-Specific Questions

Q: Which Japanese cities offer the best investment opportunities?

A: Best for foreign investors:

1. Tokyo - Highest liquidity, strong demand, international tenant pool
2. Osaka - Lower entry prices (40% less than Tokyo), growing economy
3. Nagoya - Manufacturing hub, stable market
4. Fukuoka - Younger demographics, tech sector growth

Avoid: Rural areas and small cities face population decline and high vacancy rates (13.8% nationally).

Q: What's happening with Tokyo property prices in 2025?

A: Tokyo existing condominiums rose 12.62% year-over-year in July 2025, with new condos up over 20%. Average new condo prices now exceed ¥93 million ($640,000). Prices are driven by:

• Limited new supply (housing starts down 7.8%)
• Low interest rates
• Foreign demand (20-40% of buyers in central wards)
• Urban migration (+79,285 net to Tokyo in 2024)

Experts forecast continued but moderating growth of 5-6% in 2025.

Q: Are Tokyo rents increasing?

A: Yes, but at different rates depending on measurement:

• Asking rents for new leases: +7.99% in Tokyo's 23 wards
• Official rent index (existing leases): +0.5%
• Studio apartments average ¥103,952/month ($704)
• Large units (>70m²) average ¥392,192/month ($2,657)

The gap reflects sticky existing leases while new market rents rise faster.

Policy and Regulation

Q: Will Takaichi restrict foreign real estate investment?

A: Unlikely to impose sweeping restrictions. While Takaichi has promised increased scrutiny of foreign land purchases, Japan depends on foreign capital for economic growth. Expect:

• More due diligence requirements
• Additional documentation for foreign buyers
• Heightened screening for strategic assets (farmland, near military bases)
• No outright ownership bans

The LDP's pro-business stance conflicts with strict investment barriers.

Q: How will Bank of Japan policy affect mortgages?

A: Takaichi opposes rapid rate hikes, so mortgage rates should remain low through 2025. CBRE surveys show 78% of investors expect any BOJ rate increase to be less than 50 basis points. This creates a favorable window for:

• Locking in low fixed rates
• Leveraged investment strategies
• Refinancing existing loans

However, prolonged low rates risk further yen weakness and import inflation.

Q: What are the new energy-saving standards?

A: Japan introduced stricter energy-efficiency regulations in April 2025, requiring:

• Higher insulation standards for new construction
• Energy-saving equipment in renovations
• Green building certifications

Impact: Construction costs rising, housing starts down 7.8%, delivery delays increasing. Long-term, green buildings may command premium rents, but short-term supply is constrained.

Investment Strategy

Q: Should I buy existing or new construction?

A: Existing/Secondary Market:

• Lower prices (buyers fleeing expensive new condos)
• Immediate rental income
• Higher transaction volume
• Renovation may be needed

New Construction:

• Premium prices (+20% YoY in Tokyo)
• Modern energy standards
• Warranty protection
• Lower immediate yields

Current market favors secondary purchases given new construction premiums.

Q: What's the vacancy rate outlook?

A: Highly location-dependent:

• Tokyo: 2.6% (very tight)
• National average: 13.8% (high)
• Rural areas: 20%+ in some regions

Urban concentration means Tokyo, Osaka, and Nagoya face low vacancy risk, while regional cities struggle with oversupply due to population decline.

Q: How liquid is the Japanese real estate market?

A: High liquidity in prime Tokyo locations:

• Active secondary market
• Strong institutional demand
• Foreign buyer pool
• Typical sale time: 2-6 months

Lower liquidity:

• Regional cities: 6-12+ months
• Luxury segment: Variable
• Unique properties: Extended marketing

Foreign investors should prioritize liquid markets for portfolio flexibility.

Long-Term Considerations

Q: How does Japan's aging population affect real estate?

A: Short-term (2025-2027): Minimal impact in urban cores

• Tokyo sees continued net migration
• Foreign workers needed for economic growth
• Urban concentration offsets national decline

Long-term (2027+): Increasing divergence

• Prime urban markets remain supported
• Regional markets face depopulation
• Vacancy rates rise outside major cities
• Government must address 9 million vacant homes

Invest in demographically stable locations with job growth.

Q: What are the biggest risks for foreign investors?

A: Top risks to monitor:

1. Currency volatility - Yen fluctuations impact foreign currency returns
2. Interest rate normalization - Delayed but eventual BOJ tightening
3. Regulatory changes - Immigration policy, foreign investment rules
4. Demographic decline - Long-term demand erosion in regional markets
5. Natural disasters - Earthquake, typhoon risks require insurance
6. Tax changes - Government fiscal pressures may increase levies

Q: Should I manage property myself or hire a company?

A: Foreign investors should use professional management:

• Language and legal barriers
• Local market knowledge required
• Tenant relations and maintenance
• Regulatory compliance

Management fees typically 5-8% of rent, but worth the cost for overseas investors.

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Conclusion: Strategic Recommendations for 2025-2026

For Foreign Investors

Immediate Actions (Q4 2025 - Q1 2026)

1. Lock in financing before potential BOJ rate increases
2. Target prime Tokyo wards (Minato, Shibuya, Chiyoda) for lowest risk
3. Consider secondary market given new construction premiums
4. Prepare for increased documentation under Takaichi administration
5. Diversify holdings across 2-3 properties minimum

For Expats and Residents

Housing Market Strategy

1. Budget for rent increases of 7-10% when renewing leases
2. Consider purchasing before prices rise further if planning long-term stay
3. Focus on quality neighborhoods with international schools and services
4. Monitor visa policies as Takaichi implements stricter enforcement
5. Leverage weak yen if bringing foreign currency for purchases

Market Outlook Summary

Positive Factors

• Low interest rates through 2025-2026
• Constrained supply supporting prices
• Strong foreign investment demand
• Urban concentration in Tokyo/Osaka
• Weak yen benefiting overseas buyers

Risk Factors

• Prices already elevated (+20% YoY new condos)
• Long-term demographic headwinds
• Potential policy changes on immigration
• Currency volatility
• Regional market oversupply

Final Verdict

Japan's real estate market under Prime Minister Sanae Takaichi presents selectively attractive opportunities for foreign investors and expats. The short-term outlook (2025-2026) remains positive for prime urban properties, supported by low interest rates, supply constraints, and foreign capital inflows. However, investors must be strategic: focus on liquid Tokyo markets, prepare for increased regulatory scrutiny, and acknowledge that prices have already appreciated significantly.

The window for locking in favorable financing is now, but selectivity is paramount. Regional markets face structural challenges from population decline, while Tokyo's core districts benefit from continued urbanization and international demand.

Bottom line: Buy quality properties in prime locations, secure favorable financing quickly, and maintain a long-term investment horizon. The fundamentals support Tokyo real estate, but the best returns will come from disciplined, well-researched investments rather than broad market exposure.

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