Japan housing market 2025: growth, currency and risk
Japan’s housing market in 2025 presents contrasting trends. Major urban centres such as Tokyo continue to record steady growth, supported by foreign investment and a weak yen, while many regional areas face declining demand and persistent oversupply.
Japan’s property market is diverging sharply in 2025. Prime urban areas such as Tokyo are seeing notable price increases (Nippon Tradings, 6 June 2025), supported by foreign investment and the weak yen, while regional and rural markets continue to face population decline and housing oversupply.
Although headlines highlight a resilient sector, the trend remains highly localised, and analysts note that Japan is not currently experiencing a nationwide property bubble. Underlying structural issues – such as an ageing population, low household formation, and subdued wage growth – continue to weigh on overall demand.
Japan’s housing market: from stagnation to selective growth
Japan’s real estate market has taken a distinct path over the long term. Following the 1990s asset bubble, prices fell steadily for nearly two decades, remaining muted through much of the 2010s.
This began to change with ultra-low interest rates and renewed foreign investor sentiment. The post-pandemic period brought renewed momentum, especially in major cities, as liquidity increased and investors sought stable assets amid global uncertainty.
According to data from the Land Institute of Japan, house prices have now reached multi-decade highs. Tokyo’s property prices rose 12.62% year-on-year in July 2025 (E-Housing, 10 October 2025), though the national average masks wide regional variation. Condominiums in the capital have climbed 64% over the past four years, far exceeding both wage and rent growth (CNBC, 21 August 2021).
In contrast, many regional and rural areas remain stagnant. Millions of unoccupied homes – known as akiya – continue to limit price growth outside the main urban corridors.
Weak yen and foreign capital inflows
The yen’s continued weakness is a defining feature of Japan’s economy. Having fallen over 35% against the US dollar between 1994–2024 (Reuters, 29 April 2024), the currency has made Japanese assets more affordable for overseas investors.
Foreign investors now account for around 27% of property transactions nationwide, and up to 40% of new apartment sales in central Tokyo (E-Housing, 10 October 2025).
In effect, foreign capital has become a major force in Japan’s premium real estate. Buyers from the US, Europe, Southeast Asia, and Greater China dominate Tokyo’s high-end markets, while domestic demand remains relatively subdued.
However, the uneven pace of growth has prompted attention from policymakers. The government is reviewing foreign ownership trends and affordability concerns in major cities, indicating possible regulatory adjustments in the year ahead.
Past performance is not a reliable indicator of future results.
Interest rates, inflation and BoJ policy
Inflation has risen modestly but remains low by global standards. The Bank of Japan (BoJ) continues to maintain its interest rate at 0.5%, keeping monetary conditions extremely loose, even as other central banks have tightened (Trading Economics, 12 November 2025).
While this stance supports asset prices, it also contributes to persistent yen weakness, enhancing foreign investors’ purchasing power while reducing affordability for local buyers.
BoJ officials have reiterated their focus on achieving sustainable inflation above 2%, (Bank of Japan, 27 May 2025).
Localised bubbles, not a nationwide surge
Japan’s property landscape in 2025 is defined by contrast. Tokyo, Osaka and Fukuoka have experienced notable appreciation, driven by demand for high-quality urban housing and limited new supply. Beyond these cities, however, many prefectures continue to struggle with population decline and falling prices.
Housing starts fell 26.6% year-on-year in April 2025, reflecting both cyclical slowdown and long-term demographic headwinds (Trading Economics, 30 May 2025). This imbalance – undersupply in urban centres and oversupply elsewhere – continues to influence Japan’s housing cycle.
Can the weak yen inflate another property bubble?
Japan’s ageing population, modest wage growth and falling regional demand continue to limit the scope for broad speculative activity. Instead, the risk appears concentrated in premium urban districts, where high-end developments draw focused international investment.
Official data and private-sector surveys suggest that Tokyo’s property prices could stay elevated over the next 12–24 months, supported by restricted supply and sustained foreign capital inflows (Tokyo Portfolio, 14 May 2025). However, affordability pressures and potential policy adjustments may temper price growth in the medium term.
Key takeaways
- Overall, Japan’s property market appears set for uneven expansion rather than broad-based overheating.
- Major cities such as Tokyo are benefiting from foreign capital and currency dynamics, while regional markets continue to contract amid demographic decline and excess housing stock.
- Analysts expect urban prices to stay high but stabilise, while the broader national market is likely to remain flat or slightly weaker.
- A persistently weak yen may continue to attract international buyers, but without stronger domestic demand, Japan’s next property chapter looks to be one of divergence rather than boom and bust.
Past performance is not a reliable indicator of future results.
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FAQ
Why did Japan’s housing market crash?
Japan’s housing market last saw a major downturn in the early 1990s, when overvalued assets collapsed following sharp interest rate increases by the Bank of Japan. The tightening cycle ended a decade of speculative expansion and triggered what became known as the country’s ‘Lost Decade’, a period marked by falling property values and long-term economic stagnation.
Are house prices falling in Japan?
As of 2025, Japan’s housing market presents a mixed picture. Property prices in major urban centres such as Tokyo and Osaka have continued to rise, with Tokyo up 12.62% year-on-year as of July 2025. However, many regional and rural areas are experiencing continued price declines, driven by population loss and excess housing supply. Overall, Japan is witnessing divergence rather than a uniform trend, with growth concentrated in key cities while much of the country remains subdued.
Is foreign investment driving Japan’s housing market?
Foreign investment has become an increasingly significant factor, particularly in Tokyo, Osaka and Fukuoka. The weak yen has made Japanese property more affordable for overseas buyers, attracting capital from the US, Europe and across Asia. While this supports high-end and new-build developments, it also raises concerns about affordability for domestic buyers. Policymakers are monitoring foreign ownership levels and may introduce further regulatory oversight if speculative activity increases.