In 2025, Tokyo took the number one spot in the global real estate investment market in terms of investment value, ahead of major cities such as New York and London. This fact may come as a surprise to many investors. While it is true that the historically low yen has been a tailwind for foreign investors, Tokyo's attractions do not stop there. The combination of a stable economy, unique financial environment, and urban maturity make Tokyo one of the most attractive real estate investment destinations in the world.
In this article, INA & Associates, Inc. provides a multifaceted analysis of why the Tokyo real estate market is booming based on the latest data and looks ahead to investment strategies for 2025 and beyond. Why is the world's money now going to Tokyo? We will explore the essence of this question.
Tokyo's Booming Real Estate Market: Data Shows Overwhelming Presence
The recent momentum of the Tokyo real estate market is supported by a variety of data. According to a survey by real estate services giant JLL, real estate investment in Japan in the first quarter of 2025 reached a record quarterly high of 2.952 trillion yen. This is a 23% increase over the same period last year.
Driving this market is the strong appetite of foreign investors, who in the first half of 2025 alone purchased more than 1 trillion yen in real estate, double the amount of the same period last year. As a result, Tokyo has taken the top spot in the global city-by-city investment ranking, far ahead of New York and Dallas-Fort Worth.
| Rank | City | Investment (100 million dollars) |
|---|---|---|
| 1 city | Tokyo | Tokyo |
| 2 New York | New York | New York |
| 3 | Dallas/Fort Worth | 63 |
Source:JLL (first quarter 2025 data)
This enthusiasm is also reflected in real estate prices: publicly announced land prices as of January 1, 2025 rose 2.7% year-on-year on average nationwide, the highest growth rate since 1992, after the collapse of the bubble economy. In particular, used condominium prices in the Tokyo metropolitan area have continued to rise, indicating that Tokyo's asset values are highly valued internationally.
Three Gravitating Forces Attracting Foreign Investors
So why is so much foreign investment money concentrated in Tokyo? There are three main powerful forces behind this.
Attractive Force 1: Undervalued Yen and Asset Protection
First is the sense of price undervaluation brought about by the current historic depreciation of the yen. For example, several years ago, when the yen was 110 to the dollar, a 100 million yen property cost approximately $910,000. However, with the current exchange rate of 150 yen to the dollar, the property can be purchased for approximately $670,000, which is approximately 27% less expensive when considered in dollar terms. This foreign exchange advantage provides an excellent opportunity for foreign investors to acquire Japanese real estate.
Furthermore, for wealthy foreign investors who want to protect their assets against home currency inflation and geopolitical risks, Japanese real estate, especially Tokyo properties, which are stable in value, are seen as an attractive asset protection tool.
Attractive Attraction 2: Rare Financial Environment in the World
Second, Japan has a unique financial environment. While other countries around the world have raised policy rates to curb inflation, the Bank of Japan has lifted its negative interest rate policy but still maintains an extremely accommodative financial environment. This low interest rate enables the Bank to keep borrowing costs for real estate investment low.
As a result, the residual return on investment, the so-called cash-on-cash yield, tends to be higher than in cities in other developed countries. This is a huge attraction for investors who value stable income gains.
Attractiveness 3: Stable Politics and Economy and City Maturity
The third attraction is the political and economic stability of Japan and the maturity of the city of Tokyo. With a well-developed legal system and clearly protected property rights, Japan is internationally recognized as having low country risk. This is an extremely important factor in real estate investment, where assets are held from a long-term perspective.
In addition, Tokyo is one of the largest cities in the world, with a highly developed transportation infrastructure and excellent public safety. The city's rich culture, food, and high level of living convenience provide a stable foundation for real estate rental demand. These comprehensive strengths as a city lead to confidence in the long-term stability of real estate values.
Market Forecasts and Investment Strategies for 2025 and Beyond
How will the market move in the future? Experts predict that the stance of foreign investors will change. While they have been selling to take advantage of the weak yen, they are expected to actively acquire prime properties with their accumulated investment funds (dry powder). In other words, there is a strong possibility that the market will enter a new phase of "simultaneous acquisition and sales.
As for areas, Tokyo will undoubtedly remain the center of the market, but the growth potential of the Osaka market is also attracting attention. This is not only because of the anticipation of hosting the Expo, but also because prices are more affordable than in Tokyo, and foreign investors are increasingly aware of the potential of Osaka as a city.
In this market environment, what strategies should investors adopt? One is to make core investments in properties with stable asset values, such as prime office buildings and rental condominiums in the city center, over the long term. The other is a value-added investment, in which you acquire properties with low occupancy rates or potential for redevelopment, add value, and aim for gains on sales. It is essential to select the appropriate strategy according to your investment goals and risk tolerance.
Conclusion
In this report, we have explained why investors around the world are paying attention to the Tokyo real estate market, along with data on the market. The main points are as follows
- Overwhelming market size: In 2025, Tokyo will rank first in the world in terms of real estate investment, and the market is booming, as evidenced by the data.
- 3 Attractive factors: The undervalued yen, the rare global financial environment, and the political and economic stability of the region are all factors that are attracting foreign investors.
- Diversification of investment targets: The investment targets are expanding from the traditional focus on office buildings to sectors with higher growth potential and stability, such as logistics facilities, hotels, and rental housing.
- Future Outlook: The market has the potential to become even more active, backed by an abundance of funds on standby for investment. Investors will need to take a more strategic approach.
The Tokyo real estate market is truly at a dynamic stage where the world's attention is focused. However, it is precisely because of this situation that it is essential to have an eye for the essentials and not be misled by superficial information. The key to success lies in gathering accurate information and working with a trusted partner to make investment decisions that meet your goals.
At INA & Associates, we work closely with each of our clients to provide the best real estate investment solutions for their individual asset situation and goals. If you are interested in real estate investment in Tokyo or Japan, please do not hesitate to contact us.
Frequently Asked Questions (Q&A)
Q1:Is it too late to invest in Tokyo real estate?
A1:Although prices are on the rise, the Tokyo real estate market remains an attractive investment destination given Japan's low interest rate environment, economic stability, and future growth potential. However, it is more important than ever before to have the expertise to accurately select areas and properties with future potential.
Q2:What are the risks associated with a strong yen?
A2:Exchange rate fluctuations are always a risk for foreign investors to consider. If the yen appreciates, the value of assets and rental income in dollar terms will decrease. However, the basis of real estate investment is to pursue both income gains, which are long-term rental income, and capital gains, which are future gains on sales. Stable rental income has the effect of offsetting to some extent the risk of exchange rate fluctuations. It is important to take a long-term perspective, rather than to be concerned about short-term exchange rate fluctuations. Hedging is another option to consider.
Q3:What about investing in regional cities?
A3:Certain regional cities, such as Osaka, have high growth potential due to their own development plans and increasing inbound demand. However, in general, regional cities tend to have smaller markets and lower real estate liquidity (ease of buying and selling) than Tokyo. When considering an investment, you should carefully evaluate the balance between risk and return by closely studying the demographics, industrial structure, and redevelopment plans of the city.
Q4:What investment sectors do you recommend?
A4:This depends greatly on the investor's risk tolerance and investment goals. If stable cash flow is important to you, rental housing, which is expected to be in steady demand, is a good choice. On the other hand, if you are looking for higher growth potential, logistics facilities backed by the expansion of e-commerce and the hotel sector, which is seeing a remarkable recovery in inbound demand, are attracting attention. It is important to understand the characteristics of each sector and make the right choice for your portfolio.
Q5:What should I do first to start investing in real estate?
A5:The most important first step is to find a professional you can trust. The real estate market is a world where information tends to be asymmetrical. While it is important to gain knowledge from the Internet and books, partnering with a real estate company that can provide you with the latest market trends, non-public property information, and expert legal and tax advice will greatly increase your chances of success. Why not start by consulting with several companies to find a trustworthy representative who will sincerely listen to your ideas?
Daisuke Inazawa
Representative Director of INA&Associates Inc. Based in Osaka, Tokyo, and Kanagawa, he is engaged in real estate sales, leasing, and management. He provides services based on his extensive experience in the real estate industry. Based on the philosophy that “human resources are a company's most important asset,” he places great importance on human resource development. He continues to take on the challenge of creating sustainable corporate value.
.png)
