On October 31, Tokyo Kantei released data on price-to-income ratios for both newly built and 10-year-old existing condominiums across Japan for 2023.
The report calculates the ratio by comparing the average price of a 70-square-meter condo - based on advertised prices for newly built and existing 10-year-old units - to the projected average annual income, as estimated by the Japan Cabinet Office.
This ratio is important as the higher the ratio, the less affordable real estate becomes and vice versa, the lower the ratio, the more affordable.
As the ratio climbs, more and more buyers are priced out of the sales market and usually flow into rentals.
To lower the ratio, at least one of two things must happen; wages must rise, or prices must fall.
Japan Nationwide 2023 Brand-New Condo Average Price-to-Income Ratio
For the first time since data collection began, the national average price-to-income ratio for new condos surpassed 10 times annual earnings, reaching 10.09 (up 0.43 points year-over-year; YoY).
Although average incomes rose in several prefectures, the increase in condominium prices outpaced income growth across much of Japan.
Among 46 prefectures (excluding Aomori, where no new condos were supplied), the ratio widened in 27 prefectures, narrowed in 18, and remained flat in one.
Regional Trends: Greater Tokyo, Osaka, and Nagoya [H2]
Greater Tokyo (Shutoken): 13.07 (up 0.60)
Greater Osaka (Kinki): 11.32 (up 0.39)
Greater Nagoya (Chubu): 9.27 (down 0.04)
Both the Greater Tokyo and Kinki regions saw ratios increase, largely driven by rising new condo prices.
Meanwhile, in Chubu, average income growth outstripped the rise in condo prices, resulting in a slight reduction in the ratio.
Highest Price-to-Income Ratios by Prefecture
Tokyo recorded the highest price-to-income ratio at 17.78 (up 2.97), attributed to an increase in average incomes and a surge in high-priced condo supply, pushing the average price to ¥105.26 million (up 23.0%).
Nagano ranked second at 15.88 (up 6.31), with Karuizawa’s high-end resort properties significantly elevating the prefecture’s average.
Other notable ratios included Kyoto (14.38, up 0.72), Saga (13.89, up 6.25), and Kanagawa (13.06, up 0.64).
In total, 18 prefectures saw price-to-income ratios exceed 10 times annual incomes.
Demand Driven by More Dual-Income Households
Tokyo Kantei analysts noted that the market remains firmly in sellers’ favor, with few factors suggesting price declines.
Developers are primarily targeting dual-income households while single-income households, including single individuals or couples relying on one income, seem increasingly to turn to rental properties.
Existing Condominiums: Narrowing Price-to-Income Gap
The price-to-income ratio for 10-year-old existing condominiums also rose, reaching a national average of 7.48 (up 0.21), although the expansion was the smallest since the onset of the COVID-19 pandemic.
The gap between new and existing condo ratios jumped to 2.67 from the previous year’s 0.32, indicating a marked price divergence.
Existing condo price-to-income ratios rose in 24 of the 47prefectures.
In the three major metropolitan areas:
Greater Tokyo (Shutoken): 11.14 (down 0.07)
Greater Osaka (Kinki): 9.17 (up 0.72)
Greater Nagoya (Chubu): 6.85 (down 0.07)
Tokyo topped the prefectural list with a ratio of 15.11 (up 0.62), followed by Kyoto (13.07, up 1.72), Osaka (10.74, up 0.29), and Kanagawa (10.42, down 0.01).
Only these four prefectures surpassed the 10 times annual earnings threshold.
Further Reading:
Japan Nationwide Price-to-Income Ratios for BRAND NEW CONDOS (Japanese only)
Japan Nationwide Price-to-Income Ratios for EXISTING CONDOS (Japanese only)
Source:
R.E. Port News (Japanese only)
