Price of investment-grade studio apartments reaches record high in 2017

According to Kenbiya, a multi-listing site that specializes in investment properties across Japan, the average asking price of a studio apartment in Tokyo and Osaka in 2017 reached the highest level since record-keeping began in 2006.

The average asking price of a studio apartment in Tokyo’s 23 wards in 2017 was 19,610,000 Yen, up 9% from 2016 and exceeding a previous peak of 18,280,000 Yen recorded in 2015. In Osaka City, the average asking price was 13,810,000 Yen, up 20% from 2016.

Nationwide, the average price in the fourth quarter of 2017 was 14,920,000 Yen, up 80.8% from the recent bottom recorded in the same period in 2011. The average yield was 7.71%, down from 11.92% seen in 2011.

For whole buildings (residential ‘apaato’-style), the average price in Tokyo in 2017 exceeded the 100 million Yen level for the first time. For a mansion-style whole building, the average price was 232,580,000 Yen, up 9% from last year.

Yields

The average gross yield of a studio apartment in Tokyo’s 23 wards in the fourth quarter of 2017 was 4.98% for buildings less than 10 years old, 5.29% for buildings between 10 ~ 20 years old, and 6.82% for buildings over 20 years old. In the central 3 wards (Minato, Chiyoda and Chuo), yields were 4.37% (<10 yrs old), 4.92% (10~20 yrs old) and 6.18% (>20 yrs old).

In Osaka City, the average yield on a studio apartment was 5.45% (<10 yrs old); 6.25% (10~20 yrs old) and 8.38% (>20 yrs old).

Yields on mansion-type whole buildings were at similar levels with those located in Tokyo’s 23 ward having an average gross yield of 5.00% (<10 yrs old), 5.28% (10~20 yrs old) and 6.34% (>20 yrs old). In Osaka City, the average yield ranged from 6.71% ~ 9.38%, depending on the building’s age.

Who is buying?

Prices for investment-grade residential real estate in Japan are being pushed up by demand from domestic investors. High-earning investors, such as doctors and lawyers, and even middle-income salaried workers are frequent buyers of apartments to provide a source of income. Investment seminars, some with overbearing sales tactics and offering dubious claims, may play a strong part in encouraging sales.

Recent concerns by the Financial Services Agency about possible over lending by banks eager to provide financing in a competitive low-interest rate environment has caused some cooling in the investment-loan market. Some investors are reporting difficulty in obtaining financing, while loan-to-value ratios are dropping.

Sources:
The Nikkei Shimbun, January 13, 2018.
Kenbiya Press Release, January 9, 2019.

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