In recent years, the purchase of Tokyo penthouses by wealthy foreigners has increased dramatically in the Tokyo luxury real estate market: according to 2024 statistics, the average price of a new condominium in Tokyo's 23 wards reached ¥111.81 million, and foreign real estate investment in penthouse properties, especially in central Tokyo, is on the rise.
Behind this phenomenon, there are multiple "hidden reasons" that go beyond mere investment objectives. Various factors, such as the sense of undervaluation due to the weak yen, Japan's political stability, and changes in the investment strategies of wealthy individuals, are all working together.
As INA&Associates, we have closely observed the trends of many foreign investors, and will explain in detail the truth behind this phenomenon and its impact on the Tokyo real estate market in the future.
The presence of wealthy foreign investors in the Tokyo luxury housing market is increasing year by year, with real estate investment in Japan from abroad increasing by 70% in 2024 compared to the previous year, centered on investment in luxury condominiums in the city center.
Particularly noteworthy is the surge in penthouse prices. Prices for prime properties (the top 5% of luxury properties) in the three central wards of Tokyo (Chiyoda-ku, Chuo-ku, and Minato-ku) rose more than 50% over the five years through June 2024. Driving this price increase is the presence of wealthy foreign investors who purchase in bulk for cash.
Among the wealthy overseas investors, investors from Greater China (Mainland China, Hong Kong, Taiwan, and Singapore) in particular have become the main players in the Tokyo penthouse market. Many of them purchase properties with a budget of 300 to 500 million yen in cash and rarely use loans.
In May 2025, an ultra-luxury penthouse in Harajuku, Shibuya-ku, developed by Swedish private equity firm EQT was sold for approximately 9.5 billion yen, achieving a record price of over 50 million yen per tsubo. The record price of over 50 million yen per tsubo was achieved.
In the Tokyo real estate market, the following areas are of particular interest to wealthy foreign investors:
| Area | Characteristics | Average Investment | Major Investor Groups |
|---|---|---|---|
| Minato-ku (Akasaka, Roppongi, Aoyama) | International brand power, embassy district | 300-800 million yen | Greater China, Westerners |
| Shibuya Ward (Hiroo, Ebisu, Daikanyama) | High-class residential area, cultural attraction | 200-600 million yen | Chinese, Korean |
| Chiyoda Ward (Bancho, Kasumigaseki) | Political and economic center | 400-1 billion yen | European, American, Middle Eastern |
| Chuo Ward (Ginza, Nihonbashi) | Commercial and financial center | 200-500 million yen | Chinese and Southeast Asian |
In these areas, wide penthouses of over 120 square meters are particularly popular, and are expected to maintain and increase asset values due to their rarity.
The sharp depreciation of the yen since 2022 has been a major tailwind for foreign real estate investment. Japanese real estate prices in dollar terms have fallen significantly, creating a "bargain sale" situation for foreign investors.
In fact, 87.5% of respondents to a survey of wealthy individuals in Greater China said that "now is the time to buy," and investments that take advantage of currency exchange rates are becoming more active. In particular, for investors holding strong currencies such as the U.S. dollar and Hong Kong dollar, the acquisition of yen-denominated assets is an extremely attractive investment opportunity.
The assumed yields on Tokyo penthouses are estimated to be around 3.5% to 4%, which is high compared to yields of less than 2% in major Chinese cities and yields in major European and U.S. cities.
| City | Assumed Yield | Political Stability | Liquidity |
|---|---|---|---|
| Tokyo | 3.5-4.0 | Extremely high | High |
| Hong Kong | 2.0-2.5 | Unstable | High |
| Singapore | 2.5-3.0% High | High | Medium |
| New York | 2.0-3.0% New York | High | Extremely high |
| London | 2.5-3.5 | Moderate | High |
In addition to this yield advantage, the stability of the Japanese rental market (low vacancy rates and stable rents) is also an important factor for the investment strategies of high net worth individuals who are looking for long-term investments.
Japan's political stability and good social order are extremely important investment decision factors for wealthy foreign investors. In particular, Japanese real estate is highly valued as a "safe asset" amidst the growing geopolitical risks.
Japan's institutional advantages, such as public safety, transparency of the legal system, and reliable protection of property rights, are hard to find in other countries. These factors make Tokyo luxury housing more than just an investment target; it has become a "contingency base" of value.
Due to the uncertainty in the Chinese real estate market and the growing friction with China in Western countries, wealthy Greater China residents are rushing to diversify their assets geographically. Japanese real estate investment is positioned as an important part of this asset diversification strategy.
Diversification into yen-denominated assets offers the combined benefits of reducing currency risk and at the same time securing a future migration destination. In particular, investments are increasingly made from a long-term perspective, taking into account the educational environment of children and the living environment of the elderly.
After the Corona Disaster, the values of the wealthy foreign population with regard to housing have changed dramatically. With an increase in the amount of time spent at home, more emphasis is being placed on qualitative factors of housing such as "space," "comfort," and "privacy.
Tokyo Penthouse offers the ideal living environment to meet these needs, with spacious units of over 120 square meters, large terraces, soundproofing, and home office functions to accommodate the lifestyles of the affluent class.
The high quality of Japanese living infrastructure (medical, educational, transportation, and commercial facilities) is also a major attraction for actual residents. In particular, easy access to international schools and advanced medical facilities is an important factor for affluent families looking for a long-term family residence.
The supply of penthouse properties in central Tokyo is extremely limited, and this scarcity supports the maintenance and improvement of asset values. In particular, even when there is new supply due to large-scale redevelopment, the supply-demand balance remains favorable to investors because the number of penthouses on the top floor is limited to one to several units in each building.
Furthermore, expectations for Japan's international standing, such as the Osaka-Kansai Expo in 2025 and the future plan to make Tokyo an international financial center, are also influencing investment decisions. These factors have led to an appreciation of the long-term growth potential of the Tokyo real estate market.
The most significant characteristic of Tokyo penthouse investments by wealthy foreign investors is that they are overwhelmingly cash lump-sum purchases. This allows them to avoid the risk of interest rate hikes and to make transactions quickly.
This cash purchase is due to the abundant liquidity of wealthy foreign investors as well as restrictions on loans to foreigners at Japanese financial institutions. However, cash purchases also have the advantage of increasing bargaining power and enabling acquisition on better terms.
The investment period for HNW investment strategies is usually 5 to 10 years or longer, rather than for short-term resale. This is due to the following reasons
(1) Secure stable income: Generate stable cash flow from rental income
(2) Increased asset value: Long-term price appreciation is expected due to Tokyo's growing international status.
(3) Compatibility with actual demand: Combination of investment and actual residential use
(4) Tax benefits: Reduction of transfer income tax due to long-term ownership
Various exit strategies are being considered, including selling the property in response to market conditions, inheriting the property to the next generation, and continuing to hold the property through incorporation.
Analysis of overseas investor trends shows a clear trend in the factors that are emphasized at the time of purchase:
| Factors of Importance | Degree of Importance | Specific conditions |
|---|---|---|
| Location/area | Most important | 3 central wards of Tokyo, within a 5-minute walk from a station |
| Building Grade | Important | Well-known developer, new construction |
| Exclusive area | Important | 120m2 or more, Penthouse |
| View, Direction | Important | Facing South, Central Tokyo View |
| Facilities/Specifications | Medium | State-of-the-art facilities, security |
| Management System | Moderate | 24-hour concierge |
Being in a "brand area" is particularly important in terms of both investment value and status, and properties in prime central Tokyo locations tend to be selected even if they are slightly more expensive.
Understanding the taxation aspects of foreign real estate investment is extremely important. In Japan, there are few legal restrictions on foreigners purchasing and owning real estate, but tax treatment requires attention.
Real estate income tax for non-residents:
- 20% withholding tax on rental income
- Possibility of adjusting the tax amount by filing a tax return
- Obligation to appoint a tax agent
Transfer income tax:
- Short-term transfer (5 years or less): 39.63
- Long-term transfer (over 5 years): 20.315%.
- Deduction of acquisition and transfer costs possible
The procedures for purchasing Japanese real estate by foreign HNWIs are basically the same as those for Japanese nationals, but the following additional documents are required. 1:
1. certificate of residence for foreign nationals (in the case of Japanese residents)
2. certificate of seal impression (issued by the consulate of the home country)
Affidavit (for non-residents)
4. prior notification based on the Important Land Survey Act (for applicable areas)
Due to the complexity of these procedures, cooperation with real estate companies, tax accountants, and judicial scriveners with specialized knowledge is essential.
The real estate bombingby wealthy foreign buyers has had a significant impact on price formation in Tokyo's luxury real estate market. High competitiveness due to cash purchases and low sensitivity to price have put upward pressure on market prices.
In particular, penthouse properties are increasingly being sold at levels that exceed the traditional price sensibilities of the wealthy Japanese, which is pushing up the overall price level of the market.
Developers are strengthening the following initiatives to respond to this trend among foreign investors:
1. introduction of facilities with international specifications: facilities and specifications that meet the needs of wealthy foreign investors
2. multilingual services: multilingual support from sales to after-sales service
3. increase supply of large units: proactively supply large units of over 120 square meters
4. strengthening brand power: partnering with internationally recognized brands
The presence of wealthy foreign investors in the Tokyo real estate market is expected to continue to grow. The following factors can be cited as the basis for this forecast:
Short-term factors (1-2 years):
- Continued depreciation of the yen
- Instability in the Chinese real estate market
- Continued monetary easing policy in Japan
Medium- to long-term factors (3-10 years):
- Tokyo's transformation into an international financial center
- Full recovery of inbound demand
- Relative stability of Japan in the Asian region
However, the following risk factors should also be noted
1. rising interest rates: changes in market conditions due to changes in BOJ policy
Tighter regulations: possible introduction of restrictions on foreign investment
3) Geopolitical risk: Changes in international conditions could dampen investment sentiment.
The phenomenon of the "explosive purchase" of Tokyo penthouses by wealthy foreign investors is not simply an investment boom, but a long-term trend based on multiple structural factors. Various "hidden reasons" such as investment opportunities due to the weak yen, political stability, high yields, asset diversification needs, and changing lifestyles are all working in combination.
This phenomenon is accelerating the internationalization of the Tokyo real estate market and bringing about significant changes in the price formation mechanism. While continued growth is expected in the future, proper risk management and close monitoring of market trends are critical.
INA&Associates provides up-to-date market information and professional support to investors in Japan and abroad. INA&Associates, Inc.
A1: Yes, there are few legal restrictions on foreigners purchasing real estate in Japan. However, one should be aware of areas that require prior notification based on the Important Land Survey Act and tax treatment. The purchase procedure is basically the same as for Japanese nationals, but we recommend that you seek professional assistance in preparing additional documents and appointing a tax agent.
A2: The expected yield for a Tokyo penthouse is around 3.5% to 4%. This is a high level compared to major cities in China (less than 2%) and major cities in Europe and the United States. However, it is important to conduct a detailed income/expense simulation for each individual property, as it varies depending on the location, property grade, and market environment.
A3: The standard amount of various expenses for purchasing real estate is approximately 7% to 10% of the property price. The main fees include registration and license tax, real estate acquisition tax, stamp tax, judicial scrivener's fee, and broker's commission. In the case of foreign residents, additional fees such as tax administrator's fees and translation fees may be charged.
A4: For wealthy foreigners, outsourcing to a professional management company is common. INA&Associates also offers management services for international investors.
A5: Upon sale, you will be subject to transfer tax. The tax rate is 39.63% if the holding period is 5 years or less, and 20.315% if the holding period exceeds 5 years. In addition, the impact of exchange rate fluctuations must be taken into account. Determining when to sell requires a strategic approach that takes into account both market trends and tax considerations.