Why Japan’s Real Estate Looks Cheap to Foreign Investors
At first glance, Japan’s real estate market looks like a bargain.
The yen is weak, asset prices appear cheap in foreign currency terms, and glossy brochures highlight luxury towers in Tokyo and Osaka.
But before you rush into what looks like a discount corner in a department store, pause.
From inside Japan, the reality looks very different — and far more troubling.
Is Japan’s Property Market in a Bubble?
Mortgage lending has already reached the breaking point.
Banks are approving loans at amounts that even frontline staff quietly admit are “barely manageable.”
Borrowers are increasingly forced into pair loans (husband-and-wife combined mortgages), parent-child loans, or even 50-year repayment plans just to qualify.
The strain is showing: foreclosures are rising, as more households fail to service their debt.
Luxury condos now account for one in seven sales in Tokyo, compared to just 1% a decade ago.
Developers, meanwhile, are running out of viable land. Having overbuilt prime areas, they are now resorting to buying distressed or foreclosed properties and attempting refurbishments — a move that looks more like survival than strategy.
The Hidden Risks of Buying Condos and Office Buildings in Japan
Brand-new office towers are sitting empty for months, sometimes years.
Why? Because moving offices in Japan is a logistical nightmare. Companies only relocate when absolutely forced to, not for minor cost savings or prestige.
Even when new offices are completed, tenants often fail to materialize. Developers are left with high vacancy rates, while still carrying heavy construction loans and costly tenant relocation payments.
Residential Towers: Built, But for Whom?
Japan’s Demographics: Fewer Tenants, More Inherited Properties
Luxury condominiums — especially high-rise towers — are marketed as “premium assets.”
In practice, very few ordinary Japanese buy them. Once popular for inheritance tax strategies, that loophole has largely closed.
Rental demand is no better. Population decline and a shrinking middle class mean fewer qualified tenants, while genuine homebuyers remain cautious.
The demographic time bomb looms large: within 5–10 years, Japan’s rapidly aging population will trigger a wave of inheritances. That will flood the market with properties, pushing prices down further.
Earthquakes and Regulations: Why Real Estate Isn’t a Safe Asset in Japan
Foreign buyers often assume real estate is permanent wealth. In Japan, it isn’t.
This is an earthquake-prone country. Buildings are not eternal assets; they crack, depreciate, and sometimes collapse.
The Exit Problem: Why Selling Might Be Impossible
Chinese investors who recently purchased high-rise condos are already discovering this. Rental yields have fallen short, resale values are slipping, and some are stuck holding assets they cannot exit. Disputes are even emerging among overseas buyers themselves.
Even Japanese families are being forced to sell properties due to rising inheritance taxes.
To make matters worse, the government is considering new measures such as vacancy taxes and anti-flipping regulations (e.g. bans on resale within five years).
What looks like an attractive yen-driven discount today could easily become an illiquid, loss-making trap tomorrow.
Final Thoughts: Think Twice Before Buying Property in Japan
From outside Japan, real estate may appear “cheap.”
From inside Japan, it looks dangerously overbuilt, overleveraged, and unsustainable.
Investors who mistake currency weakness for genuine value may find themselves holding not a bargain, but a bubble — one that is already beginning to deflate.
Disclaimer
This article reflects personal views and analysis for informational purposes only. It should not be considered investment advice. Readers should conduct their own research or consult with licensed professionals before making investment decisions.
