Why Tokyo Real Estate Keeps Rising Despite Population Decline

Tokyo’s housing demand stays strong despite Japan’s shrinking population. National population decline hasn’t translated into lower Tokyo real estate prices because Tokyo continues to attract newcomers. Internal migration and smaller household sizes keep Tokyo housing demand robust even as overall headcount falls.

Tokyo’s population is still growing even as Japan’s falls. In 2023 Japan’s total population dropped by around 595,000 people, yet Tokyo saw a net influx of about 68,000 residents. Young people moving in for work or study and foreigners relocating to the capital are offsetting natural population losses in Tokyo.

Central Tokyo defies national trends. The 23 wards of central Tokyo have experienced rising property values and population inflows, unlike many rural areas facing decline. Over the past decade, Tokyo property market trends show central wards’ land values surging by over 150%, while even Tokyo’s outer wards rose ~30%, highlighting intense local demand.

Housing supply in Tokyo is tight and unresponsive. Limited land, slow redevelopment of old districts, strict zoning, and high construction costs constrain new housing supply. New condominium construction in Tokyo fell to 30-year lows in 2025, skewed toward luxury units. This persistent supply-demand mismatch supports higher prices.

Real estate in Tokyo is treated as a valuable asset class. Prolonged ultra-low interest rates made mortgages cheap and property investment attractive. Domestic buyers see central Tokyo property as a stable store of wealth, and a weak yen has drawn foreign capital, further boosting demand.

Population decline doesn’t automatically lower housing prices. The number of households has continued rising because smaller households and longer lifespans mean more homes are needed per capita. Many older homeowners live longer (delaying inheritance turnover) and younger adults form separate households, so Tokyo housing demand stays resilient even with fewer people.

Tokyo’s price boom appears structural but not immune to risk. It rests on fundamentals like urban concentration, wealth effects, and constrained supply rather than speculation. Absent major shifts (e.g. a huge interest rate spike, an economic shock, or a policy-driven exodus), a sudden crash is unlikely. However, slower growth or localized corrections could occur if demographics or policies change significantly.

Buyers and renters face lasting high costs. Homebuyers in Tokyo must contend with persistently high prices that reflect structural demand, and renters have seen steep rent increases as supply lags demand. Long-term residents benefit from stable values, but newcomers and middle-income families are being priced out of central neighborhoods, shifting housing choices to suburbs or smaller units.

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The Apparent Contradiction Between Population Decline and Rising Prices

Japan’s population is shrinking at an accelerating pace, hitting record declines in recent years. One might assume that fewer people would mean less demand for housing and thus lower home prices. Indeed, Japan’s total population peaked in 2008 and has fallen every year since 2011. By 2021 the decline reached over 640,000 people in a single year (about –0.5%). Table 1 below highlights this trend alongside Tokyo’s contrasting population movement. Despite the national decline, Tokyo real estate prices have soared to record heights. This seems like a contradiction: how can Tokyo’s property market boom while the country empties out?

The answer lies in where people are moving and living. Japan’s population decline is uneven – a phenomenon of polarization. While rural regions and smaller cities rapidly lose residents, Tokyo and a few other major urban centers continue to gain people (or at least lose far fewer). Tokyo remains the economic and cultural heart of Japan, concentrating jobs, universities, and amenities that draw people from all over the country. Even as Japan’s overall headcount falls, Tokyo’s share of the population is rising.

Crucially, fewer people does not immediately equal fewer households or less housing demand. Many demographic shifts are at play. Household sizes are shrinking as more people live alone or in smaller family units, requiring more housing units per capita. Japan’s average household size fell from about 2.67 people in 1980 to around 2.33 by 2015, and is projected to approach 2.08 by 2040. In practice, this means that even with a smaller population, the number of households (and thus dwellings needed) can hold steady or even grow for a time. From 2022 to 2023, for example, Japan’s total population fell 0.41%, but because people-per-household dropped 1.24%, the number of households actually increased by 0.85% (adding ~505,000 households). More households translates into continued housing demand nationally, albeit distributed unevenly.

Nowhere is this paradox more evident than Tokyo. Tokyo has more than 7 million households and this number has kept rising, even when the city’s population briefly dipped during the pandemic. Many young adults move out of their parents’ homes to live independently in Tokyo, divorces split families into separate households, and widowed seniors continue living alone in their homes. These factors prop up housing demand. In short, it’s not raw population count that drives housing markets, but household formation and location choices. Tokyo’s rising prices amid national population decline is the outcome of people rearranging themselves – concentrating in the capital and forming smaller households.

Table 1: Japan’s Population Decline vs Tokyo’s Net Migration

Year	Japan Population Change (Approx.)	Tokyo Net Migration (Inflow)
2019	–0.15% (≈ –190,000 people)	+82,982 people (pre-pandemic peak inflow)
2020	–0.32% (≈ –410,000 people)	+31,125 (inflow slowed by pandemic)
2021	–0.51% (≈ –644,000 people)	+5,433 (near zero net flow amid COVID)
2022	–0.44% (≈ –555,000 people)	+40,000 (inflow rebounding)
2023	–0.48% (≈ –595,000 people)	+68,285 (inflow surging to new high)

Sources: Japan population from official annual estimates; Tokyo net migration from Basic Resident Register data (総務省). Notes: Net migration = people moving into Tokyo minus people leaving Tokyo (includes Japanese and foreign residents). 2022 national decline estimate from 2023 census data.

As Table 1 shows, Tokyo saw a net gain of ~68,000 people in 2023 despite the country losing almost 600,000. Even in 2021 – a year when Tokyo’s population actually dipped for the first time in decades due to COVID-19 – the net migration was roughly flat, and by 2022 the inflow was growing again. This pattern explains why Tokyo real estate prices did not collapse when Japan’s population turned downward. Population decline is happening, but not where Tokyo’s housing demand is focused. The capital continues to attract residents, mitigating local population loss and sustaining demand for homes.

In sum, the contradiction is resolved by recognizing scale and geography. Japan’s population decline is a macro trend, but housing markets are local. Tokyo, especially its central areas, exists in a different demographic microclimate. The capital’s allure, combined with shifts in living arrangements, means national population shrinkage does not automatically translate into falling housing demand in Tokyo.

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Japan Is Shrinking, but Tokyo Is Still Growing

By all accounts, Japan faces an unprecedented demographic decline. Births have fallen to record lows (fewer than 800,000 nationwide in 2023) while deaths of the large older generation mount, resulting in a natural population decrease of over 850,000 Japanese citizens in 2023. Yet in the midst of this shrinkage, Tokyo’s population has remained surprisingly buoyant. The greater Tokyo metropolitan area (Tokyo plus surrounding prefectures) still held roughly 36 million people in 2020, and Tokyo prefecture alone topped 14 million, both figures slightly up from a decade earlier. What explains Tokyo’s growth against the tide?

Internal Migration Patterns into Tokyo

The primary engine is domestic migration from other parts of Japan to Tokyo. For decades, Tokyo has experienced a net influx of people every year, especially youths from rural or regional areas coming for university or jobs. Even during overall decline, this inflow continued – briefly pausing during the peak of COVID – and is now re-accelerating. In 2023, Tokyo had a net migration gain of 68,285 people, about 80% higher than the previous year. The Tokyo region (Tokyo plus Kanagawa, Saitama, Chiba) together saw a net inflow of 126,515 people in 2023, indicating that Tokyo’s one-way magnetism is very much intact.

Who are these newcomers? Primarily young adults in their late teens and twenties, and to a lesser extent people in their 30s. Many are students or fresh graduates moving for their first job. Government data show that Tokyo’s net inflow is overwhelmingly driven by the 18–29 age group. A striking statistic: among those who moved to Tokyo in recent years, one of the single largest age cohorts was 23-year-olds – basically new university graduates arriving to start careers. This steady stream of youth replenishes Tokyo’s population even as natural decrease (more deaths than births) would otherwise cause it to fall.

Another growing component is foreign migration. Tokyo is a global city, and despite Japan’s historically low immigration, foreign residents have been increasing (foreign population nationwide hit a record 3.67 million in 2024). Tokyo draws a large share of expatriates, international students, and technical trainees. Notably, in some recent years Tokyo’s entire net population gain has been due to foreign residents offsetting a net outflow of Japanese. A weak yen and Japan’s relative affordability have also made Tokyo property attractive to foreign investors and expatriates, adding to the international population in the city.

This internal migration has deep structural roots. Tokyo concentrates a disproportionate share of Japan’s economic opportunity: over a third of the nation’s jobs in finance, media, technology, and corporate headquarters are in Tokyo. The capital’s universities draw the brightest students from all prefectures. Culturally and socially, Tokyo offers amenities, entertainment, and lifestyle options not found elsewhere in Japan. Government efforts to encourage “regional revitalization” and stem the Tokyo one-way flow have so far had limited impact. People continue to “vote with their feet,” moving to where opportunities and services cluster.

Age, Employment, and Education Concentration

The demographic composition of Tokyo versus the rest of Japan further explains diverging housing demand. Tokyo’s population skews younger and more economically active, while many rural areas skew older and retired. The inflow of 20-somethings each year keeps Tokyo’s workforce and renter/buyer pool relatively fresh. These young professionals form new households, fueling demand for apartments. By contrast, regions losing young people see declining household formation and surplus housing.

Tokyo’s economy also concentrates high-paying jobs, which support higher housing costs. Recent analysis shows Tokyo now has over 1.6 million high-income earners (annual income above ¥10 million) residing in the metro area. Such affluent residents are able and willing to pay a premium for housing in central locations. Their presence strengthens demand for prime Tokyo real estate.

Meanwhile, Tokyo’s universities and specialized industries attract a disproportionate share of college-educated individuals. The city’s information technology, finance, and professional services sectors have grown, especially in the digital economy shift accelerated by the pandemic. This economic dynamism enhances Tokyo’s attractiveness, creating a self-reinforcing cycle of migration, capital inflow, and housing demand.

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Central Tokyo Does Not Behave Like the Rest of the Country

Japan’s real estate story is often one of two worlds: the booming metropolitan centers and the struggling peripheries. Nowhere is this more evident than when comparing central Tokyo vs. suburban and regional markets. Headlines about millions of vacant houses and collapsing land values in rural Japan are real – yet central Tokyo at the same time is marked by bidding wars for apartments and land prices hitting new highs.

The 23 Wards vs Suburban and Regional Japan

“Central Tokyo” typically refers to the 23 wards that make up the core urban area of Tokyo Metropolis. These wards – especially the central five (Chiyoda, Chuo, Minato, Shinjuku, Shibuya) – are the nation’s priciest and most densely populated real estate.

Population trends show that while rural Japan continues to lose residents, the 23 wards rebounded quickly after the pandemic. Over the past 20 years, the combined population of the core three wards rose about 60%, buoyed by massive redevelopments that made high-rise urban living more appealing.

Price trends mirror this divergence. Official land price surveys show that in 2023 all 23 Tokyo wards posted rising residential land prices, averaging +3.4% year-on-year. Not a single surveyed location in the 23 wards saw a price drop in 2023. Meanwhile, much of rural Japan remains flat or declining.

Table 2: Land Price Growth (Residential) – Central Tokyo vs Outer Areas

Area	Land Price Increase, 2013–2023 (cumulative)
Central 5 Wards	+152.5%
Urban North & East	~+50–60%
Western/Suburban Wards	~+30%
Rural Japan	0% or negative

This divergence underscores that central Tokyo behaves more like a global city such as New York or London, while rural Japan faces structural decline.

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Why Housing Supply in Tokyo Does Not Respond Easily to Demand

Rising prices would normally spur new construction, but Tokyo’s housing supply has been sluggish and unresponsive.

Land Scarcity and Redevelopment Constraints

Central Tokyo is effectively built-out. New housing requires redevelopment, which is slow due to fragmented land ownership, disaster-prevention considerations, and complex negotiations. Even when redevelopment occurs, it often prioritizes commercial or luxury mixed-use projects rather than large volumes of mid-priced housing.

Zoning, Approval Timelines, and Construction Costs

Zoning limits, lengthy approval processes, and sharply rising construction costs further constrain supply. Developers increasingly focus on luxury units to maintain margins. As a result, Tokyo’s new condominium supply hit roughly 30-year lows in 2025, intensifying competition for existing homes.

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Tokyo Real Estate as a Capital Asset, Not Just Housing

Tokyo real estate increasingly functions as a financial asset.

Domestic Capital and Wealth Preservation

Ultra-low interest rates have made mortgages cheap and property an attractive store of value. Many domestic buyers view central Tokyo real estate as a stable, inflation-resistant asset, reinforcing demand and price growth.

Foreign Capital and Currency Effects

A weak yen and global search for yield have drawn foreign investors. While foreign buyers remain a minority, their participation bolsters liquidity and market confidence, further supporting prices.

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Why Population Decline Does Not Automatically Reduce Housing Prices

Housing demand follows households, not headcount. Smaller households, longer lifespans, and delayed inheritance all slow the translation of population decline into housing oversupply. In Tokyo, household numbers and migration continue to offset demographic shrinkage.

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Is This Trend Sustainable or a Potential Bubble?

Tokyo’s price growth appears structural rather than speculative, but risks exist.

Scenarios That Could Weaken Prices

• Significant interest rate rises
• Tokyo’s population peak and decline
• Large-scale housing supply increases
• Economic or employment shocks
• Policy changes and taxes

Scenarios That Likely Will Not

• Continued national population decline alone
• Modest interest rate increases
• Foreign investor pullback alone
• Short-term economic dips

Overall, a gradual moderation is more likely than a sudden crash.

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What This Means for Buyers and Renters

• Expect persistent high costs
• Central Tokyo remains comparatively stable in value
• Greater segmentation and trade-offs in housing choices
• Potential modest relief from government interventions
• Importance of quality and resilience in property selection

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FAQ

Q: Why does Tokyo real estate keep rising if Japan’s population is shrinking?
A: Because Tokyo continues to gain people and households through internal migration and smaller household sizes, combined with limited housing supply.

Q: Will Tokyo real estate crash because of demographics?
A: A sudden crash is unlikely; gradual moderation is more probable unless major structural shifts occur.

Q: Is Tokyo in a real estate bubble?
A: Most analysts view the rise as structural rather than speculative, supported by real demand and constrained supply.

Q: Does population decline matter for housing prices?
A: It matters unevenly and over the long run; Tokyo has so far offset national decline through migration and household dynamics.

Q: Is central Tokyo safer than suburban areas?
A: Generally yes; central wards historically hold value better due to scarcity and consistent demand.