As a leading metropolitan city in the Tokyo metropolitan area, Yokohama has attractive market characteristics for investment real estate. It offers a stable investment environment due to its excellent accessibility from central Tokyo, diverse area characteristics, and ongoing redevelopment projects.
Of particular note in Yokohama's real estate investment market is its convenient accessibility: as a transportation hub with a concentration of JR lines, private railways, and municipal subways, it is a hub for commuting to work, school, and sightseeing. In addition, active redevelopment projects are underway, including the Minato Mirai district, which is expected to enhance the value of the area. Another advantage of investing in the area is its attractiveness as an international city with a long history since the opening of the port.
According to the Yokohama Real Estate Market Report 2024, office vacancy rates are improving in some areas and rents are gradually recovering. As for residential real estate, demand for studio apartments, especially targeting single households, is strong, and yields remain slightly higher than in the 23 wards of Tokyo.
When considering investment real estate, it is important to assess the characteristics of each area and its potential for future development. This article provides an analysis of suitable investment areas in Yokohama City and details key points for selecting properties that will not fail.
The real estate market in Yokohama City shows different characteristics and trends depending on the area. According to the "Land Price Levels, Rents, and Yields Trend Report" published by the City of Yokohama, the situation in major business districts is as follows
Office Vacancy Rate: (% )
Rent trends
Investment Yields: Transaction yields in Yokohama are generally declining, reflecting investors' bullish attitude. This is an indication of an improving market and future growth expectations.
Several large-scale redevelopment projects are underway in Yokohama City, and these are having a significant impact on real estate values.
Minato Mirai 21 District: The waterfront area is the most active area, with a rush of high-rise buildings, hotels, and commercial facilities. Development is planned to continue after 2026.
Yokohama Station Area: The area surrounding Yokohama Station is being redeveloped with station buildings, commercial facilities, and office buildings in an effort to create a town suitable for a "gateway to an international city. The West Exit area in particular is attracting attention as an area with high investment potential due to stable rental demand from its convenient accessibility.
Kannai and Bashamichi area: Historic buildings and modern facilities coexist in this area, which is developing in terms of both business and tourist functions. The area is characterized by high demand for single occupancy properties due to the concentration of companies.
| Area | Development Characteristics | Investment Suitability | Expected Yield |
|---|---|---|---|
| Minato Mirai 21 | Focus on large-scale new development | High (potential) | 3.5%～4.5 |
| Yokohama Station area | Redevelopment and functional enhancement | High (stability) | 4.0%～5.0 |
| Kannai/Bashamichi | Renewal of existing facilities and integration of tourism | Medium to High | 4.5%～5.5 |
| Shin-Yokohama | Reinforcement of transportation node | Medium | 4.5%～6.0 |
The Minato Mirai district is a particularly high-profile investment area in Yokohama. Its investment points are as follows.
Advantages: 1.
Cautions
The area around Yokohama Station is regarded as an area where stable rental demand can be expected.
Advantages: 1.
Cautions
The Kannai/Bashamichi area is both an office district and a tourist attraction.
Advantages: 1.
Points to note
The Kanazawa Ward and Hakkeijima area, located somewhat on the outskirts of Yokohama City, has different investment characteristics.
Advantages:.
Cautions
The first step in selecting an investment property is to determine the characteristics of the area and its future potential.
Checkpoints: 1.
In Yokohama, it is particularly important to confirm redevelopment trends in the Minato Mirai district and Yokohama Station area. This is because these redevelopments are likely to increase the value of surrounding properties.
The key to a successful investment is to accurately understand the balance between supply and demand.
Checkpoints:.
When selecting a property, it is important to clarify the expected tenant base.
Checkpoints: 1.
Demand for single-person properties is particularly high in Yokohama City. Although the working-age population (15-64) of Yokohama City is expected to decline in the future, the number of single-person households is on the rise, and rental demand is expected to remain stable.
It is essential to properly perform yield calculations and income/expense simulations as the basis for investment decisions.
Surface Yield and Real Yield: (1 )
| Item | Calculation Method | Yokohama City Average |
|---|---|---|
| Surface Yield | Annual rental income / Property price x 100 | 4% to 6.5 |
| Real Yield | (Annual rental income - expenses) ÷ property price × 100 | 3.0%～4.5 |
Key Points for Income/Expenses Simulation: 1.
Yields for studio apartments in Yokohama City vary by location, but are generally around 4% to 6.5% for surface yields and 3.0% to 4.5% for real yields. Properties with significantly higher yields (7% or more) may have problems with the location or building condition, so caution is required .
Before purchasing an investment property, a thorough due diligence (detailed investigation) is an important step to prevent mistakes.
Checkpoints:.
Especially in the case of an existing property, it is recommended to request an expert to investigate the building's earthquake resistance and aging facilities. This is because hidden defects may appear on the surface as large repair costs later on, even if the property looks fine on the surface. 6.
In order to secure a stable occupancy rate in Yokohama, where there are many competing properties, it is important to identify the differentiating factors of the property.
Differentiation factors: 1.
In properties for singles in Yokohama, "security," "IT environment," and "storage space" tend to be particularly important. By providing facilities that meet these needs, you can differentiate your property from competing properties. 7.
A reliable management company is essential to the long-term success of a real estate investment.
Selection criteria: 1.
Especially in a highly competitive market such as Yokohama City, choosing a management company that is well versed in local characteristics will provide advantages in terms of maintaining occupancy rates and setting appropriate rents.
Example: Purchasing a property in a prime location near the redevelopment area in the Minato Mirai district, but in reality, the large-scale construction work caused long-term noise problems, making it difficult to secure tenants.
Workaround:.
Example: A case in which a property was purchased based solely on its high surface yield, but in reality the property was old, had high repair and maintenance costs, and the vacancy period was longer than expected, resulting in negative cash flow.
Workaround: 1.
Example: Purchased a spacious family-oriented property, but due to a mismatch with the characteristics of an area with many singles, it was difficult to secure tenants and rents had to be lowered significantly.
Workaround:.
Example: A tenant purchased an existing property based on its appearance and low price, but after moving in, problems with insulation and soundproofing were discovered, resulting in numerous complaints from tenants. As a result, the tenants had to move out early and their reputation was damaged.
Workaround: 1.
Example: A case in which a management company was selected based solely on the low management fee, but the company's reputation was damaged due to inadequate tenant service, resulting in an increase in vacancy rates and a decrease in rents.
Workaround: The client chose a management company based on not only the low management fee, but also on their services.
The following points are particularly important for successful real estate investment in Yokohama.
Understand the characteristics of the area Understand the characteristics and future potential of each area in Yokohama , and select an area that meets your investment objectives.
Analyze the balance between supply and demand Select areas and properties where stable demand can be expected, based on current vacancy rates and future supply plans
Clarify target tenants and select and renovate properties that meet their needs.
Appropriate income/expense planning Make investment decisions based not only on surface yields, but also on real yields and long-term cash flow
Thorough due diligence Conduct a detailed investigation of the property from legal , physical, and economic perspectives to discover hidden risks
Differentiation strategy Clarify points of differentiation from competing properties and maintain stable occupancy rates and reasonable rents
Establish a management system Maintain and improve long-term asset value by working with a highly reliable management company that is familiar with the local characteristics
The real estate investment market in Yokohama is an attractive investment destination if the right properties are selected, as yields are slightly higher than in the 23 wards of Tokyo and redevelopment can be expected to increase values in the future. In particular, there are currently many redevelopment plans underway for 2024 and beyond, drawing attention to the future potential of the market.
In order to avoid mistakes and obtain stable income, it is important to make a comprehensive decision based on the points introduced in this article, rather than making a decision based solely on "cheapness" or "good looks. In addition, real estate investment should only be undertaken from a long-term perspective, and an investment strategy that emphasizes steady cash flow, rather than aiming for short-term gains in value, is the path to success.
A: The best area to invest depends on your investment objectives. We recommend the Yokohama Station area for stable income, the Minatomirai area for future asset value appreciation, and the Kannai and Bashamichi areas for a high yield with a low initial investment. In both areas, properties near stations tend to be in high demand and have low vacancy risk.
A: Considering the initial investment amount and the time and effort required to manage the property, condominium unit ownership (especially studio apartments near stations) is an easier investment to start with in Yokohama. Surface yields are around 4-5% for condominiums and 5-7% for single-family homes, but single-family homes require experience in terms of management effort and risk diversification. Beginning investors generally start with condominiums and move up to single-family homes after gaining experience.
A: Both have their merits and demerits. Newly constructed properties have lower initial repair costs and are easier to secure tenants, but are more expensive and offer lower yields. Used properties tend to be relatively inexpensive and have higher yields, but it is important to assess repair costs and vacancy risk. If you are a beginner, new buildings are easier to manage, and if you are experienced and have a good eye for properties, used properties with high yields will be suitable for you.
A: The main differences are: 1) property prices (Yokohama tends to be 20-30% cheaper than Tokyo's 23 wards), 2) yields (Yokohama tends to be 0.2-0.5% higher), 3) rent levels (Tokyo's 23 wards are higher), and 4) potential (Yokohama has more room for development through redevelopment). We recommend that you choose according to your investment budget and the factors that are important to you.
A: In Yokohama City, rental demand tends to be weak, especially in areas with many hills and properties that are more than a 15-minute walk from a station. In addition, some areas on the waterfront are at risk of tsunami and storm surge, and some hilly areas are at risk of landslides, so it is essential to check hazard maps. Furthermore, properties located near factories or railroad tracks may lose competitiveness due to noise issues. It is important to select a location that takes these risk factors into consideration.