Comprehensive analysis of real estate investment property selection in Tokyo, Osaka, and Fukuoka

Tokyo boasts an unshakable popularity, Osaka is a dynamic city, and Fukuoka is growing at a rapid pace. Successful real estate investment requires an understanding of regional characteristics and an assessment of the advantages and disadvantages of each property type. This article focuses on the three major cities of Tokyo, Osaka, and Fukuoka, and introduces optimal investment strategies based on demographics and market trends. From beginners to high net worth individuals, we will provide you with key points for selecting the appropriate property for your level of experience.INA & Associates, Inc. has experts who are familiar with each city's market and can fully support your investment. Please feel free to contact us for more information. Area-specific future potential based on demographic and economic trends in each city

Tokyo: The population of Tokyo, Japan's metropolitan area, temporarily declined due to the Corona disaster, but since FY2023, the population has returned to the city center and begun to increase. The 23 wards of Tokyo alone saw a population increase of approximately 12,000 people over the course of one year. The 23 wards of Tokyo continue to attract people and businesses from Japan and abroad, and even in 2050, Tokyo alone is expected to maintain a population index of over 100 compared to 2020, indicating the high future population potential of the city. In Tokyo, the political and economic center of the city and the site of active redevelopment, demand for high-end condominiums and offices in central Tokyo is high, and the official land price in 2025 showed an average increase of 11.8% for commercial land in the 23 wards, the highest growth rate in Japan. Supported by its strength as a business hub and diverse tourism resources, Tokyo's major areas can expect stable growth in the future.

Osaka: As Japan's second largest metropolitan area, the population of the prefecture as a whole has been declining in recent years, but the population of Osaka City is generally on an upward trend. In fact, Osaka City's population continued to increase from 2017 to 2020, with an excess of young people (15-24 years old) moving into the city, confirming strong demand for single-person rental units. Osaka has four big events coming up in the future, including the hosting of the "Osaka-Kansai Expo 2025," the realization of an integrated resort (IR) project, large-scale redevelopment of the Umekita area, and plans to open a new line on the Naniwa-suji Line , providing a major tailwind for the city's development. The economic ripple effect of the Expo is estimated to be as much as 4.1 trillion yen, and further population influx and land price increases are expected as tourism infrastructure and businesses move into the area. In addition, property prices in Osaka are relatively inexpensive compared to those in Tokyo, and on average, properties can be purchased for about half the price of properties in Tokyo, and yields tend to be high. In fact, the real estate market is booming, especially in the "Kita" business district and the "Minami" commercial tourist district, with the official land price for 2025 rising 11.6% in Osaka City, comparable to that of Tokyo. Osaka, with its concentration of large corporate headquarters and bases, has strong rental demand, and the recovery in inbound tourism (tourists visiting Japan) is also providing a tailwind, so the future of the main areas is likely to be strong.

Fukuoka : Fukuoka City is the economic and population center of the Kyushu region, and in recent years has attracted attention as the city with the largest population growth in Japan. According to a survey by the Ministry of Internal Affairs and Communications, Fukuoka City will record the highest population growth among all cities, towns, and villages in Japan in 2022, with a population of 1,645,000 as of March 2024, exceeding previous future estimates (1,656,000 in 2025). Fukuoka City, which continues to see an influx of human resources, especially young people, and is proactive in supporting start-ups, boasts the highest start-up rate in a metropolitan area at 5.3%, and the cultivation of new industries is contributing to the city's vitality. In addition, domestic and foreign companies are increasingly establishing branch offices in Fukuoka due to its convenient transportation and livability, and even after the spread of telework, there is a trend of choosing Fukuoka as a regional base. Land prices are also on the rise, with commercial land prices in Fukuoka City increasing 11.3% year-on-year in 2025, a growth rate comparable to the three major metropolitan areas. The city center is being enhanced through public-private partnerships for redevelopment (Tenjin Big Bang, etc.) and plans to extend the subway line, and its future potential is extremely high. In addition, Fukuoka has an advantage over the Tokyo metropolitan area in terms of cost of living, and as young people and companies continue to move to the area, stable rental demand and property values are expected to continue to rise.

Investment Merits and Demerits by Property Type

The following is a summary of the advantages and disadvantages of each major property type for real estate investment in terms of "profitability (yield)," "vacancy risk," "operation and management burden," "initial investment amount," etc.

Condominium (a room in a condominium for sale)

• Merit: It is easy to start with a relatively small amount of personal funds, and it is easy to obtain financing from financial institutions. The low purchase price per unit keeps initial costs low, making it an easy property type for even novice investors to enter. In addition, since the entire building is maintained and managed by a management association, the owner tends to have a small management burden. The property is also highly liquid and can be resold to actual demand (potential homebuyers) when sold, providing the advantage of flexible exit strategies.

• Demerit: The biggest challenge is that owning only a single unit of a condominium unit means limited monthly rental income and the risk of having no income if the unit becomes vacant. In fact, a condominium unit will lose 100% of its income when there are no tenants, and you must continue to pay maintenance and repair fees even if the unit is vacant. In addition, the flexibility of property management is low, since it is not possible to change occupancy conditions, such as allowing pets, or to renovate the property without permission (approval from the management association is required). Another disadvantage is that the surface yield is lower than that of a single-building property, and even if the scale of operation is expanded, the rental income tends to plateau.

Single-unit apartments (small-scale housing complexes such as wood-frame and lightweight steel-frame buildings)

• Merit: By owning an entire building, you can receive rental income from multiple units. When all units are fully occupied, the rental income is several times larger than that of condominiums, and even if one unit is vacant, income is received from other tenants, thereby spreading out the risk of vacancy. Wooden or light steel-frame apartments are relatively inexpensive to build, and in many cases, the property price is lower than that of RC condominiums, making it possible to operate multiple units with the same budget. Another advantage of owning a single building is that the owner can adjust tenant recruitment conditions and renovate the entire building at his/her discretion, allowing for a high degree of freedom in management. The surface yield of a single building is generally several percentage points higher than that of a condominium (e.g., in the 8% range).

• Demerit: Single-family properties tend to be expensive to purchase (tens of millions of yen to over 100 million yen), and the initial investment hurdle is higher than for condominiums. Depending on the amount of personal funds and creditworthiness, a down payment of 20% or more of the property price may be required, placing a burden on the financing side. It is also important to note that the owner is responsible for the maintenance and management of the entire building, so there are significant repair costs and operational hassles. Wooden apartments, in particular, deteriorate quickly with age and require periodic repairs such as painting the exterior walls, waterproofing the roof, and updating facilities. In addition, single-building properties are illiquid and buyers are limited to investors, so it may take time to sell. Fire and disaster risks are also associated with the entire building, so it is important to keep in mind that risks are likely to be concentrated.

Single-unit condominiums (mid- to high-rise condominiums such as RC structures)

• Advantages: While the basic advantages are similar to those of a single apartment building, a single RC condominium building is highly durable and earthquake resistant, making it suitable for long-term stable operations. Because of their solid structure, they are highly reliable, and tend to attract high-rent families and corporate tenants. The number of units in a mid- to high-rise condominium with an elevator is particularly attractive because the total rent when the units are fully occupied is large, making it easy to maximize the scale of income. The risk diversification effect of multiple units mitigates the possibility of a decrease in rental income due to vacancies, making it an easy property type to generate stable income. In addition, the high value of the building (asset value) makes it easy to obtain evaluation from financial institutions, making it a particularly popular investment property among wealthy individuals. The leverage effect of a loan is also significant, making it an attractive option for investors seeking to expand their asset size.

• Demerit: Like apartments, single-family condominiums are expensive to acquire, often costing several hundred million yen. The barriers to entry are high, as one must have sufficient funds on hand and a line of credit to purchase a condominium. In addition, because of the large number of floors and facilities such as elevators, maintenance and management costs (facility inspection costs, large-scale repair costs, etc.) are high. Elevator replacements, exterior wall repairs, etc. require tens of millions of dollars on a regular basis, so cash flow management is important. Liquidity is also limited, and buyers are limited not only to investors but also to wealthy individuals such as corporate owners, so there is a risk of limited sales and a long time required to convert funds. Another disadvantage is the risk of damage to all units due to disasters, etc., since the investment is concentrated in a single building.

Detached Houses (Detached Houses for Investment)

• Merit: Compared to apartments, investments in detached houses often require a smaller initial investment, and existing houses can be purchased for as little as several million yen to several tens of millions of yen. In addition, there are few competing investors in the market for existing detached houses, and the competition for acquiring properties is not as fierce, making it easier to find a good bargain. Even in suburban areas, there is a certain demand for rental properties from families who prefer detached houses with gardens, and depending on the property, high yields (10% or more) can be expected. In addition, since most tenants are families, the average tenancy period tends to be long, which leads to stable rental management. Unlike condominiums, detached houses do not have common areas, making them easier to manage and less prone to noise problems with neighboring units, which is an operational advantage. Furthermore, there is a wide range of exit strategies, such as "rent it out," "live in it yourself," or "sell it including the land," and it can be used flexibly according to changes in life stages. Since the property is a real estate with land, the asset value is likely to remain in the land, and it is relatively easy to increase the value of the property by selling the vacant land or rebuilding the property.

• Disadvantage: The biggest disadvantage is the risk of zero income in the event of vacancy; since only one unit is leased per household, rental income is lost if the tenant moves out, and the risk cannot be diversified as in multi-unit ownership. In addition, since there is an upper limit to the rental income per unit, the speed of asset growth is slow, and it is difficult to increase the number of units all at once. In terms of financing, it is difficult to obtain a loan from a bank for an investment in detached houses, as it is difficult to be considered a business loan. In particular, older detached houses tend to have low collateral value, making it difficult to increase the loan amount, and the equity ratio tends to be high. There is also the risk of aging and maintenance costs inherent to the building, and the burden of self-managing the roof, exterior walls, water supply and drainage systems, etc. for the entire building. Unlike condominiums, there is no specialized contractor to manage the entire building, so owners need to be aware of the need for periodic inspections and repair plans on their own. As a result, it can be said that single-family home investments are for those who want to steadily accumulate profits on a small scale, and are not suitable for large-scale operations.

Commercial buildings (commercial properties with stores, offices, etc.)

• Merit: Commercial buildings (tenant properties) tend to have higher rent levels and higher surface yields than residential properties. In good locations, such as in front of train stations or in busy downtown areas, tenant companies have strong demand to rent even at higher rents, and the ability to earn higher rental income than from residential properties is a major attraction. If you are able to attract quality tenants, the asset value of the property itself will increase, and you can expect further revenue growth through higher rents. In addition, tenant contracts are generally long term (fixed-term lease, long-term lease, etc.), and in some cases, stable income can be expected. Another advantage not found in residential leases is that a portion of the security deposit and security deposit received from commercial tenants can be recognized as income (amortized). Another advantage is that the owner does not have to bear the cost of interior remodeling, since the tenant is responsible for restoring the property to its original condition when the tenant vacates. As described above, commercial building investment can be a high-return investment that can generate higher returns than residential properties if managed well.

• Demerit: Compared to residential properties, tenant properties have the risk of prolonged vacancy. Since the rent per parcel is high and highly specialized, a single vacancy can have a significant impact on the overall income of the property, and it tends to take time to find the next tenant. In addition, the property is susceptible to economic fluctuations, and in the event of a recession, multiple tenants may vacate the property at once or rent may be reduced, which poses the risk of unstable income. In fact, in the early days of the Corona disaster, many retail tenants withdrew and vacancies increased rapidly. Furthermore, attracting tenants requires specialized know-how, and the type of business must be suited to the location and structure of the building to ensure longevity. The skill to attract the right type of business or company to a property with a marketing strategy is required, and may not be in the hands of an ordinary individual. In addition, the acquisition cost of a single building is extremely high, and financial institutions are strict in their screening process (even the creditworthiness of tenants is checked). Another demerit is that it requires financial and managerial skills, as it costs a large amount of money not only for the initial investment, but also for interior renovations and building facility upgrades after tenants vacate. In general, commercial building investment is a high-risk, high-return investment, and is a sophisticated investment area where success or failure depends on the selection of property location and tenant strategy.

Recommended Property Types by Investor Type

Property Types Suitable for Beginners in Real Estate Investment

For first-time real estate investors, investing in condominiums is the most common and easy choice. Condominiums can be purchased with relatively small amounts of personal funds, and financing is easy to obtain from financial institutions, making it a low hurdle to overcome when preparing funds. In addition, building management can be entrusted to a management association, and rental management can easily be outsourced to a management company, making it an easy property for even beginners to handle with little management effort. In fact, it is said that " if you are new to real estate investment, condominium unit ownership is easier from both a financial and risk standpoint," and it is recommended that you start by gaining experience with a small-scale investment. After becoming familiar with the market and rental management through investing in condominium units, you can gradually increase the number of properties to build up your assets without difficulty. However, since it is difficult to expect large profits from a single condominium unit in terms of profitability, this type of investment is suitable for those with small funds to spare or those who wish to keep loan repayment ratios low. Investing in detached houses can also be a good option for beginners who can afford to purchase an existing house in a nearby area for a low price. However, since vacancy risk directly affects the income and expenses of detached houses, it would be safer to start with condominiums in urban areas, where vacancy risk can be more easily diversified.

Property types suitable for intermediate investors (investors with a certain level of experience and assets)

For intermediate investors who have gained a certain level of investment experience and have the capital and credit to make additional investments, a step up to a single property is recommended. Once you have mastered the mechanics of real estate investment through condominium ownership, the next step is to acquire a single apartment or condominium building to expand your scale, which will dramatically increase your profitability. Although the purchase price of a single building is large, it is attractive because you can receive rental income from multiple units, which improves management efficiency and disperses vacancy risk, thereby increasing stability. In particular, if you live in a rural area and can take advantage of local advantages, or if you live in the Tokyo area but are familiar with properties in the suburbs or regional cities, the strategy of acquiring an existing single building at a low price and managing it for a high yield is suitable for you. If you are an intermediate investor with sufficient assets and annual income, you can expand your assets by leveraging your capital by investing in a single RC condominium building. Whole buildings are becoming increasingly popular not only among high-net-worth individuals but also among middle-class individual investors, and the stable income and high asset value of multiple units are attracting attention as investment targets that "make it easy to maximize rental income while reducing vacancy risk. In fact, single building investments have a higher surface yield than condominiums (as mentioned above, the average yield is around 8% for a single apartment and 7% for a condominium), making it easier to increase the scale of income without increasing the number of properties. Therefore, for investors who have already built up a track record in condominiums and investors who can prepare a certain amount of personal funds, shifting to or adding a single building would be appropriate as the next step. Since the loan amount will be larger when moving to a single building, it is important to conduct sufficient yield simulation and risk hedging (e.g., securing reserve funds in case of vacancy) when selecting properties.

Property Types Suitable for High Net Worth Individuals and Senior Investors

For high-net-worth investors with ample financial resources and extensive investment experience, investment in single large properties and commercial buildings may be an option. Particularly popular among high-net-worth individuals is the ownership of an entire condominium or apartment building because of the diversification of income sources and stability provided by multiple units, as well as the economies of scale of rental income. Although the initial investment is higher than other types of properties, the ability to obtain high-cost financing from financial institutions and enjoy the leverage effect is also a key point favored by wealthy individuals. Specifically, high-end rental condominiums in the city center and RC condominiums near train stations in major cities such as Osaka and Fukuoka are chosen by wealthy investors as stable assets. More aggressive high-net-worth individuals are also expanding their investments into commercial real estate such as office buildings and commercial facilities. Although commercial buildings are more difficult to manage, if managed well, they can provide higher returns than residential properties and contribute to asset portfolio diversification. For example, if you can acquire a tenant building in the city center, you can expect not only stable rental income from the company, but also a significant increase in asset value. Another perspective unique to high-net-worth individuals is real estate investment with an awareness of inheritance tax and income tax measures. There are cases in which they purchase a single wooden apartment building to save on taxes through depreciation, and there are cases in which they take advantage of their high income tax bracket to convert a luxury residence in the center of Tokyo into an income-producing property. As described above, wealthy individuals with ample assets and human resources are making a variety of real estate investments while maintaining a balance between profitability and asset preservation. However, since expertise is essential for professional properties such as commercial buildings, it is wise to work with a reliable real estate company or seek advice from a professional partner.

Market Trends, Transaction Examples, and Yield Information for Each City

Market Trends and Yield Trends in Tokyo

The Tokyo real estate market is once again booming after 2023 due to the recovery from the Corona disaster and the return to the city center. Vacancy rates for offices in central Tokyo are improving and rents are on an upward trend, and for residential properties as well, rental demand is rising and rents in Tokyo are on an upward trend. In fact, the official land prices for 2025 show that commercial land prices in the 23 wards of Tokyo are rising at an average rate of 11.8%, the highest in Japan, and land prices continue to soar, especially in areas where redevelopment is underway (Toranomon, Shibuya, Shinagawa, etc.). In recent transactions, luxury condominiums in central Tokyo have been greeted with strong demand from wealthy people in Japan and abroad, and there have been reports that prices for million-dollar apartments and tower condominiums have reached record levels. There has also been an influx of foreign investment money, and there have been a series of large transactions (acquisitions by REITs and foreign capital) of Tokyo A-class office buildings. In terms of yields, investment yields are lower in Tokyo than in other cities due to high property prices. According to the Kenbike market report, the average surface yield in the Tokyo metropolitan area is approximately 6.67%, which is below the national average of 7.21%. Yields in the 4-5% range are common, especially for recently built studio apartments in popular areas. For example, data shows that the average yield for condominiums less than 10 years old in Tokyo's 23 wards is 4.09% (Q1, 2023). Even for single-building properties, many prime properties in central Tokyo are trading at yields of around 5-6%, and are viewed as low-risk, low-return assets. On the other hand, in Tokyo and its suburbs, yields of over 8-10% can be seen, mainly for older properties, and there is a large difference depending on the area and the grade of the property. In general, Tokyo is a market with "low yields but high preservation of asset value," and is suitable for investors who aim for solid asset management.

Market Trends and Yield Trends in Osaka

Osaka's real estate market is attracting increasing attention nationwide in anticipation of favorable factors such as the 2025 World Expo and the attraction of IRs to the city. The rush for redevelopment continues in the center of the city, with new large-scale buildings being supplied one after another in the "Grand Front Osaka" area in the Umeda area and in the Namba/Shinsaibashi area. In addition, the concentration of companies in Osaka and the increase in the number of tourists have resulted in firm demand for rental apartments. For example, the average rent for rental condominiums in Osaka City has been rising in some areas in recent years, depending on the area. The market trend is that property prices are lower in Osaka than in Tokyo, and therefore yields are higher, which is an attractive investment. In fact, the average surface yield of income-producing properties in the Kansai region is 7.36%, which is higher than in the Tokyo metropolitan area, and even within Osaka City, there are many examples of yields of around 5% to 7% for studio apartments and 8% to 10% for single-family apartments. As of 2020, the yield in Osaka will be approximately 5%), a level higher than that of Tokyo. In terms of price, the average contracted price of an existing studio apartment in Osaka is estimated to be around 12-15 million yen, which is considerably cheaper than the average of Tokyo's 23 wards. Recent examples of transactions include the purchase of a recently built condominium in Osaka City by an investor in Tokyo, as well as a move by a regional bank to expand financing for income-producing properties in Osaka. In addition, some investors are beginning to operate guesthouses and serviced apartments in Osaka in anticipation of increased demand for hotels and private accommodations due to the increase in the number of visitors expected from the 2025 World Expo. The Osaka market is expected to continue to be active as the second most attractive investment area after the Tokyo metropolitan area, due to its "medium yield and medium risk" and reasonable property prices.

Market Trends and Yield Trends in Fukuoka

Fukuoka's real estate market is performing outstandingly well among regional cities. As mentioned above, population growth and economic growth continue, which directly translates into increased demand for real estate. Recent topics include the "Tenjin Big Bang" redevelopment project in Tenjin, Chuo-ku, Fukuoka City, and large-scale projects around Hakata Station. While these projects have increased the supply of office and commercial facilities, tenant demand has been even more robust, and the office vacancy rate remains low. In terms of housing, the market rent for rental apartments in Fukuoka City has been on an upward trend over the past 10 years, and this is especially noticeable for properties with good access to the city center. Factors that have been pointed out behind the rent increase include "easy access and livable properties are more likely to be selected," "population inflow mainly among young people," and "increased demand due to redevelopment. In terms of investment yield, the average surface yield in the Kyushu-Okinawa area, including Fukuoka, is 10.12%, higher than the national average. This figure includes properties in small and medium-sized regional cities, but even within Fukuoka City, high-yielding projects of 7% to 8% for condominiums and over 10% for single-family apartments can be found in this market. In fact, some people even say, "When investing in real estate in Fukuoka Prefecture, aim for a surface yield of 10% or more," offering attractive profitability for investors. The price level is also characterized by a light initial investment burden, with the average sales price of a pre-owned studio in Fukuoka City at approximately 8.4 million yen (in 2021), less than half the price in Tokyo. Recent transactions have seen an increase in outside investment focused on Fukuoka's growth potential, such as a case in which an investor from the Tokyo metropolitan area purchased an old building in Fukuoka, renovated it, and converted it into office space for a start-up company. Local companies and wealthy individuals are also active in acquiring single-family condominiums in the city center, and the local real estate investment activity is said to be among the most active in Japan. The Fukuoka market is an investment area with an excellent balance between profitability and future potential, as it can be expected to increase asset values due to population growth while securing relatively high yields.

Comparison of Average Yields and Property Prices by Region

Finally, we will compare the general situation in Tokyo, Osaka, and Fukuoka in terms of average surface yields and approximate investment property price ranges. The table below is a rough numerical image of each region. Actual yields and prices vary greatly depending on the location and age of the property, but are presented as reference indicators.

*Tokyo tends to have higher property prices and lower yields, while Fukuoka tends to have lower prices and higher yields. Osaka is in between, with yields higher than Tokyo but lower than Fukuoka. As shown above, it can be said that Tokyo is asset value oriented, Fukuoka is rate-of-return oriented, and Osaka is balanced type. It is important to select an area that meets your investment objectives based on the characteristics of each market.

Conclusion

Tokyo, Osaka, and Fukuoka are attractive areas for real estate investment, although their demographics and economic development are different from each other. Tokyo is a promising low-risk investment destination with high stability in future asset values due to its overwhelming population and economic scale. Osaka, on the other hand, is suitable for investments targeting growth potential, as it is expected to offer relatively high yields due to the upcoming economic events and inexpensive property prices. Although Fukuoka is a regional city, demand is increasing due to population growth, and high-yielding properties can be found in many areas, making it an area of interest for income-oriented investors.

There is a wide variety of property types to choose from, ranging from condominiums to single-family income-producing properties, detached houses, and commercial buildings, each with its own merits and demerits. Beginners should start with small and low-risk properties, while intermediate investors can expand their portfolio with a single building, and wealthy investors can move on to a variety of asset strategies. Although real estate investment is affected by the economic environment and regional characteristics in some aspects, if one assesses demand trends and selects appropriate properties, one can achieve stable returns over the long term. We hope that the analysis in this report will help you understand the Tokyo, Osaka, and Fukuoka markets and select properties, and contribute to your investment decisions.