The real estate market in 2025 is seemingly contradictory, with some media whispering that we are on the eve of a "bubble burst," while tower condominiums in central Tokyo are trading at high prices. This suggests that real estate prices are in the midst of a major structural change of polarization. In other words, the disparity between real estate whose value continues to rise and real estate whose value inevitably declines is becoming clearer than ever before.
In these times, many people have serious concerns and questions such as, "Will the asset value of my real estate holdings be maintained in the future? Real estate is not only a "home" but also an important "asset" that supports your life planning. How can we protect and nurture its value? A compass for this purpose is strongly needed now.
In this article, I, who am involved in asset consulting for many high-net-worth clients as a member of INA & Associates, will explain the essence of this era of polarization from a professional perspective. I will also explain the specific "axis of decision-making" in detail so that you can choose real estate without regrets in the future.
The polarization of real estate prices is not a sudden phenomenon. It is a complex interplay of multiple social and economic factors that is manifesting itself as a structural change. Here we take a deeper look at the three main factors behind this phenomenon.
First, it is important to grasp the actual state of the market from objective data. The Real Estate Price Index published by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) is a highly reliable indicator that measures the temperature of the market, with the average price in 2010 set at 100. The latest data shows that the national housing composite index has been on a consistent upward trend since around 2013, but a detailed analysis of the breakdown of the index reveals a clear picture of polarization.
Particularly striking is the surge in condominium prices. Compared to other regions and detached houses, condominium prices in the Tokyo metropolitan area have shown a prominent growth rate, driving the overall market. On the other hand, residential land prices in regional areas have long been flat or even declining, with the exception of some central cities. This indicates that demand is concentrated in highly convenient urban real estate, creating a large price gap with other real estate.
In March 2024, the Bank of Japan lifted its negative interest rate policy for the first time in almost 17 years, steering monetary policy toward normalization. This means that our economy will return to a "world with interest rates. This change affects the real estate market in two ways.
One is a rise in mortgage rates. Rising interest rates will increase the burden of repayment on the amount borrowed, which may lead to a decrease in purchasing power. In particular, those with limited budgets may find their options narrowing or may even decide not to buy at all.
The other factor is a change in the flow of investment money. If interest rates rise, it is possible that some of the money that has been directed toward real estate investment will shift to low-risk deposits and bonds. As a result, the real estate market as a whole is expected to gradually shift toward a buyer's market.
Importantly, however, this impact will not be uniform. High net worth individuals with strong financial resources and foreign investors are less likely to be affected by rising interest rates, and in fact, from the perspective of asset protection, they may accelerate their investments in prime real estate, such as prime urban locations that are less susceptible to loss of value. As a result, the selection of "buyable" and "unbuyable" properties will become more severe as the buying population becomes more limited. 2.
Japan's total population is in a declining phase, but the reality varies greatly from region to region. Population continues to flow into the Tokyo metropolitan area (Tokyo, Kanagawa, Saitama, and Chiba prefectures), and the concentration of population is accelerating, especially in urban centers. In places where people congregate, housing demand continues to outstrip supply, making it difficult for prices to fall.
On the other hand, in rural areas where the population is seriously declining, the increase in vacant houses is becoming a social problem. In areas where demand is expected to taper off, continuing to hold real estate is itself a risk, and downward pressure on prices will intensify. Thus, demographics is the most fundamental factor that determines shades of real estate demand, and is an essential perspective in predicting long-term asset values.
In recent years, the construction industry has experienced soaring material prices and a serious labor shortage, and the cost of building new properties continues to rise. As a result, prices of new properties have remained high and are becoming unaffordable for many consumers.
This situation has had the effect of turning consumers' attention to the relatively inexpensive used market. However, anything used is not necessarily good enough. Consumers are now evaluating the quality of properties with a more exacting eye. In addition to basic performance criteria such as earthquake resistance and thermal insulation, they are also scrutinizing whether or not the property has been well managed and renovated in line with the times.
As a result, properly maintained, high-quality used properties are highly valued in the market, while those that are not are unable to attract buyers and are forced to lower their prices. Building quality is gaining weight as an important factor influencing prices.
In this era of polarization, what should we base our judgment of real estate asset values on? Here are five universal criteria that I always tell my clients. 1.
The value of real estate is inseparable from the value of the "town. It is essential to look not only at immediate convenience, but also at how the town will develop or possibly decline in the future.
One thing to look out for is the presence or absence of redevelopment plans. Large-scale redevelopment in front of a station or the opening of a new commercial facility can be a catalyst for increasing the city's attractiveness and encouraging a population influx. Extension of transportation infrastructure and opening of new stations are also major factors that dramatically improve convenience and boost property values. Furthermore, the availability of government services, especially childcare support programs, and the presence of high-quality medical facilities play an important role in attracting families and increasing the number of permanent residents in the area. 2.
While the value of buildings declines over time, the value of land is more likely to be maintained over time if it is in a good location. In particular, for detached houses in areas with stable land prices, even if the building value approaches zero, the land value will support the overall asset.
Important factors in evaluating the value of land are topography (whether the land is shaped or irregularly shaped), road access (width and tangency of the road), and zoning. For example, for the same area of land, a rectangular lot with a wide frontage and a wide front road can be easily rebuilt or sold, and its property value will be evaluated highly. The key to selecting real estate is to determine the "strength of the land" that will not easily lose its value in the future. 3.
The asset value of a condominium can be summed up in the adage, "Buy the management. No matter how well located and how high grade the condominium is, if it is poorly managed, its value will be lost over time.
The most important items to check are the long-term repair plan and the repair reserve fund. It is essential to confirm that large-scale repairs are planned and that sufficient funds have been set aside for such repairs. A condominium with a well-functioning management association and high awareness among residents will maintain high asset value even after the building is built, since the building is properly maintained and common spaces are kept clean. During previews, attention should be paid not only to the interior of the rooms, but also to the condition of common areas such as entrances and garbage storage areas. 4.
As people's lifestyles and values change, the performance required of housing is also evolving. In particular, basic housing performance, such as earthquake resistance, thermal insulation, and energy efficiency, is no longer an added value, but is becoming a prerequisite for maintaining asset value.
For example, "excellent long-term housing" that meets national standards and "ZEH" specification housing that achieves an energy balance of zero or less not only qualify for tax incentives, but also reduce utility costs and create a comfortable indoor environment. These high-performance homes will be a clear differentiator from other properties when they are sold or leased in the future, leading to increased competitiveness.
Japan is constantly at risk of natural disasters such as earthquakes and floods. This perspective of safety will become increasingly important when considering the asset value of real estate.
The minimum step is to check hazard maps to see if the property is located in a flood-prone area or a landslide hazard area. In addition, the solidity of the ground, the availability of evacuation routes in case of emergency, and the local disaster prevention system are also worthy of evaluation. The fundamental value of being able to live safely and securely is an irreplaceable asset.
| Comparison Items | Condominium | Detached house |
|---|---|---|
| Source of Value | Location, management, common areas | Land, location, individuality |
| Price fluctuation risk | Susceptible to overall market trends | Relatively stable, supported by land valuation |
| Liquidity (ease of selling) | Standardized and easy to compare | Strongly individualized and easily divided in evaluation |
| Maintenance costs | Management fees and reserve for repairs (planned) | Self-management (risk of unexpected expenses) |
| Freedom | Restricted by covenants | High (remodeling, rebuilding) |
INA&Associates' main clients are high-net-worth individuals who view real estate not as a mere speculation target, but as the core of long-term asset building, building their portfolios in a very strategic manner. Their way of thinking contains many hints for surviving in this era of polarization.
High-net-worth individuals avoid concentrating their assets in a single property. For example, they hedge against the risk of fluctuations in a particular market by diversifying areas and property types, such as an income-producing condominium in the city center, a family home in the suburbs, or a resort property overseas. This is nothing more than the basic investment principle of not putting all your eggs in one basket. The first step to building stable assets is to look at your assets as a whole and be aware of a well-balanced portfolio.
There are two types of income from real estate investment: "income gains," such as rental income, and "capital gains," which are gains from the sale of properties. High net worth individuals are always conscious of the balance between these two. While securing daily income from income-producing properties that generate stable cash flow, they also aim to increase the value of their assets themselves by investing in prime locations in the city center where future price increases can be expected. This ambidextrous strategy is the driving force behind the snowball effect of asset growth.
One of the most important assets of high-net-worth individuals is quality information and reliable contacts. They are quick to grasp not only publicly released information, but also information that has not yet been made public through their own networks, and use it to make investment decisions. In order to determine the authenticity and value of this information, they build close relationships with real estate professionals such as ourselves, as well as tax accountants, lawyers, and other experts. In these times of rapid change, having a trusted professional as a partner greatly increases the probability of success.
In this article, we have explained the nature of "polarization" in the real estate market in 2025 and the decision criteria for protecting asset values in this environment.
The polarization of real estate prices means the arrival of an era in which value itself will be selected, not merely price differences. We need to grasp the waves of macro changes such as demographics and monetary policy, and from a micro perspective, we need to assess the potential of individual properties. Having both of these perspectives is essential for selecting real estate in the future.
The most important thing is to face the asset from a long-term perspective, without being misled by short-term prices and yields. The five decision criteria introduced today (future potential of the town, land value, management condition, housing performance, and disaster risk) should serve as universal guidelines for this purpose.
Times of change are both risks and new opportunities. Your future will be richer and more certain if you engage in strategic asset building with a knowledgeable and trusted partner.
At INA&Associates, we work diligently with each client's situation and goals to provide tailor-made real estate strategies. Please feel free to contact us with any questions you may have regarding asset values or reviewing your portfolio. We look forward to hearing from you.
A: In the short term , rising mortgage rates may cool purchasing interest and put pressure on prices to adjust. However, in central Tokyo and other popular areas where demand is strong, the impact is expected to be limited due to firm demand from financially strong buyers and foreign investors. What is important is to make a comprehensive judgment based not only on one factor, interest rate trends, but also on the balance of supply and demand and the future potential of the area.
A: Not all local real estate values decline equally. Even in rural areas, there are places where unique demand exists, such as areas near train stations in the core cities of the region, rich natural environments, or areas with international tourist attractions. It is important to analyze the potential of each specific area, rather than making judgments based on a uniform "regional" category.
A: The two most important factors are the "physical condition of the building" and "management history. Especially in the case of condominiums, be sure to check through the minutes of the management association and the long-term repair plan whether past large-scale repairs have been carried out as planned, and whether future repair plans and the necessary reserve funds have been adequately secured. For detached houses, we strongly recommend that a professional inspection (building condition survey) be conducted to determine in advance whether there are any structural problems or leaks.
A: First, we recommend that you conduct a "health check" of your property. Start by objectively ascertaining the current market price (assessed value), the expected rent if the property is leased, and, if it is a condominium, the state of management. If any issues are found, we will then consider countermeasures such as remodeling and active participation in management association activities. Accurately understanding the current situation is the first step in taking appropriate next steps.