Tokyo Condo Prices Soar Past ¥100 Million, Sparking BOJ Rate Hike and Policy Scramble

Key Takeaways

• ¥100 Million Threshold Breached: As of November 2024, the average price for both new and used condominiums in Tokyo's 23 central wards has surpassed ¥100 million (approx. $670,000), a historic high. The average used condo price hit ¥114.85 million.
• Bank of Japan Hikes Rates: In a landmark policy shift, the BOJ has raised interest rates, ending decades of its ultra-loose monetary policy. The 10-year Japanese government bond (JGB) yield subsequently jumped to 2.1%, a level not seen in roughly 26 years.
• Foreign Buyers Fueling Demand: The surge is partly driven by foreign investors, particularly from Taiwan and mainland China, capitalizing on the weak yen which makes Japanese property relatively cheap.
• Conflicting Policy Signals: While the BOJ is tightening, the government plans to raise the lending cap for its popular "Flat 35" fixed-rate mortgage to ¥120 million, a move that could sustain high prices.

Tokyo's residential property market has hit a boiling point, shattering a key psychological and financial barrier. The average price for a condominium in the city's 23 core wards has surged past ¥100 million for both new and existing units, according to data from late 2024. The secondary market is particularly hot, with the average price for a used condo reaching ¥114.85 million in November.

A key driver behind this boom is a wave of foreign capital. A government survey revealed that individuals with overseas addresses acquired about 3% of new condos in Tokyo, with buyers from Taiwan and China being the most prominent. The historically weak yen has made Tokyo real estate an attractive asset for international investors seeking value.

This sustained price pressure has forced the hand of the Bank of Japan (BOJ). The central bank recently announced an interest rate hike, officially ending an era of zero-to-negative interest rates that defined the Japanese economy for decades. The market's reaction was swift: the yield on the 10-year JGB, a benchmark for long-term lending, shot up to 2.1%, its highest point in nearly 26 years. This move is designed to curb inflation and cool overheating asset markets.

Policy Collision Course: The BOJ is hitting the brakes while the government may be pressing the accelerator. The plan to raise the "Flat 35" mortgage limit to ¥120 million directly counters the central bank's tightening efforts, creating uncertainty for investors and homebuyers.