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ホームコラムREAL ESTATE INVESTMENTWhy you should invest in real estate in Tokyo

Why you should invest in real estate in Tokyo

Thank you for visiting the website of Time Inc.

My name is Tatsuki Kanaya, CEO & Real Estate Notary of Time Inc.

In this article, we will introduce the reasons why you should invest in real estate in the Tokyo metropolitan area.

1. The population of the Tokyo metropolitan area is the largest in the world

According to the United Nations, the Tokyo metropolitan area has the largest population in the world. (The World’s Cities in 2018)

It is expected to remain the largest in the world until it is overtaken by Delhi, India in 2030.

2018 2030
1. Tokyo 37,468 1. Delhi 38,939
2. Delhi 28,514 2. Tokyo 36,574
3. Shanghai 25,582 3. Shanghai 32,869
Population in 2018 and 2030 (thousands)

2. The GDP of the Tokyo metropolitan area is the largest in the world

According to the data from the Brookings Institution and PricewaterhouseCoopers, the Tokyo metropolitan area has the largest GDP by city in the world. There are many large companies and wealthy individuals in Tokyo, and real estate transactions are also active.

Rent income from tenants is important for real estate investment. Since the population and economy are large, it is relatively easy to find tenants and the risk of vacancy can be reduced. It also has low liquidity risk as it is easy to find buyers.

Brookings Institution(2014年) PricewaterhouseCoopers(2008年)
Tokyo 1617.0 Tokyo 1,479
New York 1403.0 New York 1,406
Los Angeles 860.5 Los Angeles 792
TOP 3 GDP by City (1 Billion USD)

3. Headquarters of global companies gather in Tokyo

3-1. The majority of Global Fortune 500 Japanese companies are headquartered in Tokyo

There are many attractive and profitable companies in Tokyo.

The world’s largest companies are listed in the Global Fortune 500, and the majority of Japanese companies listed there are headquartered in Tokyo. This means that the profits of overseas subsidiaries and branches are controlled in Tokyo.

It is analyzed that Japan continues to record current account surplus because dividends from overseas subsidiaries of Japanese companies are increasing. Even in years when the trade balance is in deficit, the current account is always in surplus.

There is no doubt that overseas investment and dividends by Japanese companies have a positive impact on the Japanese economy. And many of the big companies that support the Japanese economy are headquartered in Tokyo. This is working positively for the real estate market in Tokyo.

4. Real estate prices in Tokyo continue to rise

According to data from Real Estate Information Network for East Japan (REINS), the number of contracted properties and prices for both condominiums and pre-owned houses have increased year-on-year. (Monthly bulletin market watch for March 3rd year of Reiwa)

Condominium

Contracted property in March (Greater Tokyo area)
・Number of cases 4,228 + 16.1% year-on-year
・Average Price: 38.37 million yen + 10.0% year-on-year

Pre-owned houses

Contracted property in March (Greater Tokyo area)
・Number of cases 1,629 cases + 25.8% year-on-year
・Average Price: 34.66 million yen + 11.5% year-on-year

It has been reported that the number of contracts concluded for both condominiums and pre-owned houses has reached a record high since the inauguration of Real Estate Information Network for East Japan (REINS).

5. There are many wealthy individuals in Tokyo

There are many wealthy individuals in Tokyo.

According to the reports from US research firms Wealth-X and Nippon.com, Tokyo had 6,785 ultra wealthy people with more than $ 30 million in wealth in 2017, ranking third in the world after Hong Kong and New York.

Japan is reported to have the second largest number of ultra wealthy people in the world after the United States. (“Ultra-rich” population, Tokyo and Osaka are in the top 10: Hong Kong is the best in the world)

According to Nomura Research Institute, Ltd., there are 1.33 million wealthy households in Japan with net financial assets of 100 million yen or more, and both the number of households and the amount of assets held are increasing. (Nomura Research Institute estimates that 1.33 million households are wealthy in Japan and total net financial assets are 333 trillion yen)

Since this statistic does not include landowners who own almost all of their assets in land or buildings, I feel that there are actually more wealthy individuals in Japan. There are local landowners who manage their assets in real estate rather than financial assets.

There are certainly more wealthy individuals in Japan as these landowners are not included in the statistics above.

6. Tokyo is a safe city

Tokyo is safe and you can walk safely even at midnight.

The Economist has rated Tokyo as the safest of the 60 cities. (Safe Cities Index 2019)

Anti-government demonstrations and riots are occurring in other major cities overseas. In Tokyo, order is maintained even after a state of emergency is declared.

Demonstrations and riots destroying buildings is a horror for real estate investors. We recommend investing in a safe area of Tokyo.

Many of the tenants live by observing the rules stated in the lease contract. This is very important to protect your valuable assets.

In addition, the city is very clean, so residents can live comfortably.

7. Disciplined national character

7-1. Lower Resident Risk

We are in the real estate management business, and most of the residents live by observing the rules properly.

This is because there are several screenings before moving in. For example, in the case of our company, we require the applicant to pass the screening of the rent guarantee company with which we are affiliated. In addition, if they are likely to cause trouble, we may refuse to move in after consulting with the owner.

Real estate investment has resident risk as well as rent delinquency risk. Therefore, it is necessary to prevent the move-in of people who are likely to cause trouble. Once they move in, it will be difficult to force the tenants out. These risks can be reduced by passing the screenings of the management company as well as the guarantee company.

In general, Japanese people follow the rules. The higher the popularity of property, the lower the risk of residents. For example, if you have a condominium in a prime location in the city center, you will be flooded with move-in applications, so you can choose a resident. If this is an old apartment in a rural area, it is difficult to find a resident in the first place, so it is difficult to reduce the resident risk.

In central Tokyo, the population is large and the average income is high, so it is easy to reduce the resident risk.

8. Strong transportation infrastructure

Wherever you go in Tokyo, you can live without a car because of the well-developed transportation infrastructure.

Trains, buses and taxis are operated well and all arrive on time.

8-1. Shinjuku station is the busiest station in the world

According to Guinness World Records, Shinjuku Station is the busiest station by passenger use with an estimated average of 3,590,000 passengers per day. (Busiest station

In addition, Shibuya Station, Ikebukuro Station, Tokyo Station, etc. have the largest number of passengers in the world. Trains arrive on time in minutes, and you can go anywhere in Tokyo with just the train. It is a very convenient city for both investors and residents.

8-2. Tokyo is a disaster-resilient city

Tokyo is prepared for all kinds of disasters.

For example, at Shibuya Station, a rainwater storage facility was put into service in August 2020 in preparation for flood damage, which has made it possible to temporarily store 4,000 tons of rainwater. In this way, in Tokyo, the government, corporations, and citizens of Tokyo are working together to take disaster countermeasures. Since each city is developing in preparation for disaster risk, it is easy to collect data published by the government and corporations when investing in real estates.

Tokyo has withstood the Great East Japan Earthquake, so it can be said that it is a disaster-resilient city.

9. There are historic buildings of cultural value

Tokyo is a modern city with many skyscrapers and a well-developed transportation network, but there are many historical buildings of cultural value. Not only the places registered as cultural properties by the government, but also the small shrines and temples you encounter while taking a walk were built in the Edo period. There are many historical buildings that have a history of over 1000 years.

10. Tokyo is the center of subculture

BANDAI NAMCO’s stock price rises with this tweet

Tokyo is the center of subculture.

Many anime, manga, and games are born in Tokyo. And these markets continue to expand.

In January 2021, the Tokyo-based BANDAI NAMCO’s stock price rose as the world’s richest man, Elon Musk suggest to be a fan of Bandai Namco’s THE IDOLM@STER. I learned about THE IDOLM@STER for the first time in Bloomberg’s coverage, so I think it had a lot of diffusion power. His tweet is liked by 582.5K on Twitter. (Bandai H share rebounds, expects profit from Mr. Musk’s “character push”)

Also, he mentioned the movie “Your Name” in his tweet. It was liked by 85.8K, which is a great diffusion power.

Many of the companies and creators are based in Tokyo, and these people also rent or buy offices.

The development of the Japanese content industry is working positively on the real estate market in Tokyo.

11. At the end

I lived in London, Auckland, Los Angeles and Tokyo, but Tokyo is my favorite city.

I can confidently recommend real estate in Tokyo because the people living in Tokyo are very attractive. No matter where you go, they are all polite and kind. All the photos in this article were taken by myself and I like them all because I have good memories. The charm of the cityscape of Tokyo is that even the photos taken casually become beautiful.

Tokyo is safe and you can go out with peace of mind at night. The food is delicious and there is plenty of entertainment. It’s always interesting to discover new things just by taking a walk.

Real estate investment in Tokyo is a good choice as real estate values continue to rise and stable rent income comes in.

If you are thinking of investing in real estate in the Tokyo metropolitan area, please feel free to contact us. We would be more than happy to help you find the best real estate for your needs. 

Real Estate Notary, Tatsuki Kanaya

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REAL ESTATE INVESTMENT

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Time Inc.

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