Condominium prices, which have continued to surge mainly in the Tokyo metropolitan area, are now beginning to show multiple signs of decline, including population decline, rising interest rates, and a drop in new condominium contract rates. For owners considering a sale, it is important to understand what phase the market is currently in.
Condominium prices have continued to rise over the long term
Against the backdrop of the Bank of Japan's monetary easing policy, condominium prices rose 69% over approximately nine years from 2013 onward. Rising official land prices, soaring construction costs due to the Tokyo Olympics, and increased demand from wealthy buyers all overlapped, pushing prices, especially in the Tokyo metropolitan area, to levels comparable to the bubble era.
What are the signs that condominium prices may decline going forward?
Decline in new condominium contract rates
The contract rate for new condominiums, which had remained high for a long period, is trending downward. This is because in addition to changes in demand caused by the coronavirus, persistently high prices are beginning to weaken buyers' willingness to purchase.
Accelerating population decline, aging, and lower marriage rates
In 2021, Tokyo's population turned negative for the first time in 26 years. If population decline continues, demand for condominiums, especially in the Tokyo metropolitan area, will shrink, increasing downward pressure on prices. This is compounded by more listings caused by an aging population and weaker purchase demand resulting from lower marriage rates.
Higher loan burdens caused by rising interest rates
As interest rates rise with the end of monetary easing, more owners will choose to sell because monthly repayments increase, while buyers' purchasing power declines. This mismatch between supply and demand pushes condominium prices downward.
When is the best time to sell a condominium?
Although signals of price declines are emerging, many properties are still maintaining high price levels at this stage. If you are considering a sale, it is a rational decision to start moving before the decline becomes full-fledged. Three points to consider when deciding on the timing of a sale:
- Continuously check the latest market data: Real estate value indices from the Ministry of Land, Infrastructure, Transport and Tourism, transaction volumes, interest rate trends, and more
- Understand the market price for your sale: Request appraisals from multiple companies to confirm an appropriate price
- Do not overtrust your own information: The future of the market is uncertain. Make use of professional advice
What conditions make a condominium less likely to lose asset value?
Even when market conditions change, condominiums that are more likely to retain their value tend to have a good location, resilience to natural disasters, a large number of units, and responsiveness to current needs. Choosing based on these criteria from the time of purchase supports the preservation of long-term asset value.
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Frequently Asked Questions (FAQ)
Q. When are condominium prices expected to decline?
A clear forecast is difficult, but if population decline, rising interest rates, and falling new condominium contract rates continue, downward pressure is expected to build gradually. It is important to keep monitoring market data on an ongoing basis.
Q. How do rising interest rates affect condominium prices?
Buyers face heavier loan burdens, which reduces their purchasing power. At the same time, owners whose loan repayments have become more difficult may choose to sell, increasing supply and leading to lower prices.
Q. Should I sell my condominium now?
It cannot be said categorically, but the current phase, with prices still at high levels, is favorable for selling. Based on your life plan and asset position, we recommend consulting multiple real estate companies.
Q. How should I choose a condominium that is less likely to lose asset value?
Properties in highly convenient locations, areas with low natural disaster risk, large-scale condominiums with strong management, and homes that meet current needs such as energy efficiency and smart-home features are in a more favorable position.
