Property prices in Tokyo have been on a rise over the past few years with Japan’s economic upturn. However, if you select your investment wisely, you can still expect good and stable returns. The age of the property and its size greatly influence returns, but location remains one of the most important factors. Here, we give an overview of which areas in Tokyo promise the highest returns (ROI). All values given are averages and can vary greatly depending on the individual factors of the property selected.

Location, location, location

Tokyo is split up into 23 special wards (ku in Japanese, e.g. Minato-ku) and a handful of cities (shi in Japanese, e.g. Mitaka-shi) on the outskirts of the large urban area. Experts generally consider an investment within the 23 wards safest as these offer the lowest risk of vacancies. Within the 23 wards, there is another gap between those wards that fall within the Yamanote ring line that encircles central Tokyo and those outside of it.

The wards inside are also known as the central five wards (C5W). While the C5W are the most popular and most expensive, they also offer lower returns than those outside the Yamanote Line. However, some people prefer to buy here, be it for reasons of image or for the added security that C5W units are the most popular.

Best central Tokyo ward for investment

For those that seek the security of investing in the heart of Tokyo, Shinjuku ward offers the best returns. A 10-year-old property will on average return 4.75%, with returns improving the older the building gets. Thirty-year-old properties return 5.3% on average, while brand-new to 5-year-old units only bank 4.3% on average.

However, a Shinjuku investment does not come cheap. Property prices here are typically above JPY 1 million per square metre — around:

• JPY 1,175,000 for a new property
• JPY 1,080,000 for a 10-year-old property
• JPY 910,000 for a 20-year-old property
• JPY 795,000 for a 30-year-old property

Note that the ROI can vary within a ward quite drastically, e.g. the Ichigaya area in Shinjuku ward is considered a lot swankier than Okubo.

Best wards in all of Tokyo for investment

Better ROI is found outside the C5W and the Yamanote Line. Adachi ward leads the ranking. Here, a 10-year-old property will return just over 6%. Again, returns improve for older buildings. Twenty-year-old properties return 6.7% and 30-year-old ones 6.3% on average, while brand-new to 5-year-old units only bank 6.1% on average.

Investment in an outer ward is also cheaper. Property prices here are well below JPY 1 million per square meter.

In Adachi Ward, square metre prices are around:

• JPY 550,000 for a new property
• JPY 515,000 for a 10-year-old property
• JPY 410,000 for a 20-year-old property
• JPY 380,000 for 30-year-old property

Other factors that influence ROI

Other factors that influence ROI include:

• distance from a station
• building age
• size of the unit/property
• apartment (a wooden building) vs. mansion (generally a larger concrete construction)
• if the property had a death or is in what is located in what is considered an undesirable neighbourhood (e.g. close to a cemetery, slaughterhouse, industrial facilities or a yakuza stronghold)

 To fully understand the Tokyo property market, consult with a local and experienced real estate agent. A trustworthy agent will be transparent about all risk factors involved. Read our tips on how to find one.

By Mareike Dornhege

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