Tokyo, the bustling capital of Japan, has long been a magnet for real estate investors seeking stability and a slice of one of the world’s largest property markets.
Located at heart of the world’s third-biggest economy, Tokyo is an absolute megacity with its approximately 35 million inhabitants in the metro area.
Naturally, the sheer size offers a diverse array of neighborhoods catering to different investment strategies and budgets.
In this guide, we’ll explore the best neighborhoods in Tokyo for real estate investment while taking into account factors such as price per square meter, rental yields, resident profiles, and future growth prospects.
The Allure of Tokyo’s Real Estate Market
Before looking at specific neighborhoods, let’s take a moment to understand what makes Tokyo’s real estate market so appealing to investors.
Japan’s capital city is renowned for its blend of tradition and modernity, with cutting-edge technology and infrastructure coexisting alongside historic temples and quaint streets.
This unique combination, coupled with a stable political environment and a robust economy, has contributed to Tokyo’s status as a safe haven for real estate investment.
Moreover, Tokyo’s property market has demonstrated remarkable resilience, even during global economic downturns.
The city’s real estate prices have maintained a steady upward trajectory, driven by factors such as population growth, urbanization, and the city’s enduring popularity among both locals and expatriates.
Still, rental yields in Tokyo are only between 2% to 3% gross. This is extremely low by regional standards, and it’s worth considering if you’re looking to rent your home to a tenant.
Budget-Friendly Neighborhoods
For investors working with a limited budget, Tokyo offers several neighborhoods that provide excellent value for money without compromising on location or growth potential. Let’s take a closer look at three such areas:
Adachi
With an average price per square meter of ¥500,000, Adachi is one of the most affordable neighborhoods in Tokyo.
Located in the city’s northeast, Adachi offers a mix of older apartments and new constructions, catering to a diverse resident profile that includes elderly residents and young families.
The area’s strengths lie in its strong community feel and abundant green spaces, making it an attractive option for those seeking a more laid-back lifestyle.
However, its distance from central Tokyo and the prevalence of older housing stock may be seen as drawbacks by some investors.
Nerima
Situated in Tokyo’s western suburbs, Nerima strikes a balance between affordability and proximity to the city center.
With an average price per square meter of ¥650,000, Nerima offers a mix of old and new apartments, as well as single-family homes, catering primarily to families.
The area’s family-friendly atmosphere and relatively easy access to central Tokyo are its main strengths, although it may lack the vibrant nightlife and entertainment options found in more central districts.
Nerima’s family-friendly atmosphere and relatively easy access to central Tokyo are its main strengths.
Itabashi
Another budget-friendly option, Itabashi, has an average price per square meter of ¥600,000.
Located on the northern edge of Tokyo, Itabashi has been somewhat overlooked in favor of more central locations. However, ongoing developments and improved transport links are expected to drive property values up in the coming years.
The area is home to a mix of students, young professionals, and elderly residents, attracted by its affordability and strong community atmosphere.
The main weaknesses of Itabashi are its distance from central Tokyo and the age of many of its buildings.
Most Expensive Areas in Tokyo
For investors seeking high-end properties and premium locations, Tokyo has no shortage of upscale neighborhoods.
These areas are characterized by their central locations, luxurious amenities, and strong demand from affluent residents and expatriates.
Minato
Minato, with an average price per square meter of ¥2,000,000, is one of Tokyo’s most prestigious and sought-after neighborhoods.
Home to many embassies, international schools, and luxury developments, Minato attracts wealthy professionals, expatriates, and celebrities.
Minato’s prime location, high-end amenities, and excellent transport links add to the appeal of living here. However, the high cost of properties and the dense development may be seen as drawbacks by some investors.
Despite this, Minato is expected to maintain its popularity and command premium prices due to its unbeatable location and status.
Shibuya
There’s nowhere in the world quite like Shibuya! Famous for its iconic scramble crossing and vibrant shopping scene, Shibuya is another popular choice among investors.
\With an average price per square meter of ¥1,500,000, Shibuya caters to young professionals and creatives drawn to its trendy atmosphere and diverse property options.
The area’s strengths include its solid transport links, wide range of amenities, and ongoing development projects. But Shibuya is certainly noisy and crowded which may deter some potential residents.
Despite this, Shibuya’s enduring popularity and growth potential make it an attractive option for investors.
Chiyoda
Chiyoda, home to the Imperial Palace and numerous government offices, is one of Tokyo’s most prestigious and expensive neighborhoods.
On average, the price square meter here is ¥2,500,000 which is rather high. Chiyoda attracts successful entrepreneurs, politicians, and affluent families. The area’s central location, rich cultural and historical significance, and tranquil green spaces are all bonuses!
Chiyoda may be less appealing to those seeking a vibrant nightlife scene, and the high property prices can be a barrier for some investors.
Still, Chiyoda’s proximity to the city’s political and economic centers ensures a stable, high demand for properties in the area.
Tokyo’s Emerging Hotspots
In addition to established neighborhoods, Tokyo also has several up-and-coming areas that offer exciting investment opportunities.
These emerging hotspots are characterized by their growing popularity, unique character, and potential for future appreciation.
Nakano
Once a quiet residential area, Nakano has seen a surge in popularity in recent years, particularly among younger residents and creatives.
The average price per square meter for real estate in Nakano is ¥800,000, As such, the area offers more affordable housing options compared to central Tokyo while still providing easy access to the city center.
Nakano’s positive aspects include its growing arts scene, strong community feel, and increasing number of trendy shops and cafes.
Yet its relative distance from the city center and fewer high-end amenities may be seen as weaknesses by some investors. Still though, Nakano is expected to continue its upward trajectory as it develops a distinct identity and attracts a diverse mix of residents.
Nakano’s strengths include its growing arts scene, strong community feel, and increasing number of trendy shops and cafes.
Koenji
Known for its vintage shops, live music venues, and laid-back atmosphere, Koenji has evolved from a sleepy suburb to a hip, vibrant neighborhood.
The average price per square meter is about ¥850,000 here, and thus, Koenji offers a rather affordable alternative to the city’s central districts.
Several of the best parts of living in Koenji include its sense of community, creative arts scene, along with a growing number of independent businesses.
Koenji lacks the polished, upscale feel of other neighborhoods though, and its eclectic character may not appeal to all investors.
Regardless, Koenji’s growing popularity and unique charm make it an attractive option for those seeking a neighborhood with a distinct personality.
Sumida
Sumida, located in eastern Tokyo, has recently gained attention due to its ongoing redevelopment and the construction of the Tokyo Skytree, a major tourist attraction.
With an average price per square meter of ¥750,000, Sumida offers a mix of traditional and modern housing options at more affordable prices compared to central Tokyo.
Sumida’s rich history, growing number of amenities, and excellent transport links are the main reasons why people choose to live here. However, there are fewer high-end luxury options compared to other neighborhoods. Commuting to central Tokyo also takes a bit longer.
Despite this, Sumida’s ongoing transformation and increasing popularity make it an attractive option for investors seeking a neighborhood with growth potential.
Locations with Strong Rental Demand
For investors primarily interested in generating rental income, Tokyo has a few areas that boast strong demand from various tenant profiles.
These areas offer attractive rental yields and the potential for consistent cash flow.
With that said, keep in mind that rental yields are very low in Japan at between 2%-3% on average. Remember also these are gross rental yields before taxes, maintenance, realtor commission and other expenses.
Quite frankly, you should consider buying real estate elsewhere in Asia if your primary goal is rental income.
Shibuya
As mentioned earlier, Shibuya is a popular choice among young professionals and expatriates, making it an excellent option for investors seeking to capitalize on the area’s strong rental demand.
With an average rent of ¥200,000 per month for a one-bedroom apartment, Shibuya offers rental yields ranging from 3% to 5%.
To maximize gains, you should ideally focus on properties near popular areas like Shibuya Crossing or Harajuku, as these locations tend to have lower vacancy rates and attract higher-paying tenants.
However, the high cost of properties and potential for noise may be seen as drawbacks by some investors.
Minato
Minato, with its concentration of embassies and international businesses, attracts a more affluent tenant base, including diplomats and executives.
The area’s luxury apartments and high-end amenities command premium rents, with a two-bedroom apartment averaging between ¥300,000 and ¥500,000 per month.
Rental yields in Minato typically range from 3% to 4%, with properties in exclusive areas like Roppongi and Azabu commanding higher rents.
To succeed in Minato’s rental market, investors should focus on properties with unique features or luxury amenities.
Keep in mind that high investment cost and potential for longer vacancies due to a smaller tenant pool may be seen as drawbacks to buying property in Minato though.
Minato, with its concentration of embassies and international businesses, attracts a more affluent tenant base, including diplomats and executives.
Setagaya
Setagaya, located in western Tokyo, offers a more residential and family-friendly atmosphere, attracting families and long-term residents.
The area’s larger homes and apartments cater to tenants seeking more space, with average rents for a family-sized property ranging from ¥250,000 to ¥400,000 per month.
Normally, rental yields in Setagaya fall between 3% and 4%, with properties near good schools and parks commanding higher rents.
In order to enhance rentability, investors should focus on family-oriented amenities. Setagaya’s less central location and high initial investment costs are a weaknesses to most investors.
Neighborhoods for Short-Term Rentals
With Tokyo’s booming tourism industry, investors may also consider properties in neighborhoods popular among short-term visitors.
These areas offer the potential for higher nightly rates and occupancy levels, although investors should be aware of the increased competition and regulatory requirements associated with short-term rentals.
Shinjuku
Known for its vibrant entertainment district and bustling shopping areas, Shinjuku is a popular choice among tourists and business travelers.
Nightly rates in Shinjuku range from ¥12,000 to ¥18,000, with properties near Shinjuku Station commanding higher prices.
And of course, the area’s small apartments and studios cater to short-term visitors who seek convenience and easy access to the city’s attractions.
To maximize income, investors should focus on well-equipped properties with modern amenities. But remember that Shinjuku’s crowded and noisy atmosphere may be a drawback for some guests.
Asakusa
Asakusa, with its traditional atmosphere and historic landmarks like the Senso-ji Temple, attracts visitors seeking a more authentic Japanese experience.
The area’s short-term rental market offers a mix of traditional-style accommodations and modern apartments, with average nightly rates ranging from ¥8,000 to ¥12,000.
Houses in Asakusa that blend traditional Japanese aesthetics with modern comforts tend to be more popular among guests.
Still, Asakusa’s less central location and competition from traditional hotels and ryokans may be seen as weaknesses by some investors.
Where Should You Buy Property in Tokyo?
Japan’s real estate market offers a wealth of investment opportunities, catering to a wide range of budgets, strategies, and preferences.
From the budget-friendly neighborhoods of Adachi and Itabashi to the upscale districts of Minato and Chiyoda, investors can find properties that align with their goals and risk tolerance.
Emerging hotspots like Nakano, Koenji, and Sumida are up-and-coming areas with strong growth potential, while districts like Shibuya, Minato, and Setagaya offer stable (even if low!) rental yields.
For investors who are interested in short-term rentals, Shinjuku and Asakusa provide opportunities to capitalize on Tokyo’s thriving tourism industry, although increased competition and regulatory requirements should be carefully considered.
At the end of the day, the key to investing in Tokyo successfully lies in doing thorough research and having a clear understanding of one’s investment goals and risk tolerance.
FAQ: Locations in Tokyo
What the Most Expensive District in Tokyo?
The most expensive district in Tokyo is Minato. With an average price per square meter of ¥2,000,000, Minato is one of Tokyo's most prestigious and sought-after neighborhoods.
It's home to many embassies, international schools, and luxury developments, attracting wealthy professionals, expats, and celebrities. Chiyoda is another extremely expensive area, with prices reaching ¥2,500,000 per square meter.
Which District of Tokyo Has the Highest Rental Yields?
While Tokyo generally has low rental yields compared to other Asian cities, Shibuya tends to offer relatively higher yields. Rental yields in Shibuya typically range from 3% to 5%, which is considered high for Tokyo.
However, it's important to note that even these yields are low by regional standards, with most areas in Tokyo offering gross yields between 2% to 3%.
Where is the Cheapest Place to Buy Property in Tokyo?
Yes, foreigners can own real estate in Japan. There are no legal restrictions on foreigners purchasing property in Japan. However, it's important to note that the process can be complex, especially if you're not fluent in Japanese. It's often recommended to work with a bilingual real estate agent or seek assistance from a trusted local friend.
Additionally, while foreigners can own property, the Japanese approach to real estate as a short-term asset (20-30 years) rather than a long-term investment is something to keep in mind.
What is the Largest District in Tokyo?
Ota-Ku spans 59.46 square kilometres which gives it the largest area within the 23 wards in Tokyo. Kamata is a close second.
Can Foreigners Own Real Estate in Japan?
Yes, foreigners can own real estate in Japan. There are no legal restrictions on foreigners purchasing property in Japan. However, it's important to note that the process can be complex, especially if you're not fluent in Japanese.
It's often recommended to work with a bilingual real estate agent or seek assistance from a trusted local friend. Additionally, while foreigners can own property, the Japanese approach to real estate as a short-term asset (20-30 years) rather than a long-term investment is something to keep in mind.