Japan real estate rebuilds case for global capital
18 July 2025
Japan is emerging from years of deflation, with real estate proving a key beneficiary as investors seek assets that can generate attractive real returns.[1]
In a world gripped by uncertainty, Japan — long associated with low growth — is re-establishing itself as the land of rising property value. Prices are climbing, global capital is flowing in, and long-held land assets are finally hitting the market.
The return of moderate inflation is lifting both business revenues and real asset prices.[2] At the center of this shift is Tokyo, where the average cost of a new apartment has exceeded ¥100 million (US$700,000) for two consecutive years.[3] In the first quarter of 2025, Tokyo attracted more real estate investment than any other city in the world, surpassing New York and Dallas-Fort Worth, with US$11 billion in deal value.[4]
Parallels with Japan’s 1980s property bubble are easy to draw. Back then, Tokyo car parks reportedly rivaled Manhattan real estate and the Imperial Palace grounds were estimated to be worth more than California.[5]
But this time, the story is fundamentally different.
Today’s market is being driven not by speculation or excessive leverage, but by more durable forces: foreign capital inflows, corporate land divestment, infrastructure-led demand, booming tourism, increased immigration and gradually rising inflation.
For investors with equity positions to leverage, this is a timely opportunity. Equity-backed financing offers a way to unlock liquidity while preserving upside. Japanese real estate, with an expectation that income and price appreciation may outpace borrowing costs, presents a compelling arbitrage.
Conservatism gives way to changing times
Japan’s corporate sector — once known for sitting on undervalued land used largely as collateral — is embracing a new “asset-light” approach that was once associated with Japanese franchise businesses. Railway operators, manufacturers and other legacy landowners are offloading non-core real estate to boost productivity and fund growth in areas like digital infrastructure, making prime property accessible for the first time in years.[6]
Global investors have taken note. Blackstone, PAG, and Gaw Capital are among those actively deploying capital into Japanese property. Foreign investors contributed nearly ¥2.2 trillion (US$14.5 billion) into domestic real estate last year, a 20% year-on-year increase.[7] Japanese financial institutions and trading houses are also launching large-scale property funds targeting billions in assets under management.[8]
Commercial real estate has proven especially resilient. Tokyo’s office attendance remains among the highest globally – well ahead of major US cities[9] – supporting stable valuations. Institutional investors increasingly see Japan’s commercial property market as relatively insulated from the post-pandemic corrections seen elsewhere.
Infrastructure demand is rising too, with new data centers planned to support artificial intelligence, cyber defense, and natural disaster resilience.[10] At the same time, a surge in inbound tourism – fueled by post-pandemic “revenge travel” – has pushed hotel rates higher in Japan’s major cities and revived investor interest in hospitality assets.[11]
The opportunity is attracting the interest of retail investors as well.
Japan’s open-door approach to foreign property ownership stands out amid tightening restrictions in countries like Canada and Australia. Japan imposes no additional taxes, levies, or ownership restrictions on non-residents — even for second homes or investment properties.[12]
Longer-term demographic trends are also reshaping demand. Japan’s foreign resident population grew at twice the government’s forecast last year, reaching a record high of 3.77 million. A growing share – many from China, South and Southeast Asia – are settling outside Tokyo, supporting labor markets and driving housing demand in regional centers. In Osaka, the Chinese population has nearly doubled over the past decade, with affluent homebuyers increasingly active since the pandemic – a trend mirrored in other major cities as overseas interest in Japanese urban property builds.[13],[14]
The Japan Research Institute estimates foreign-born residents could account for more than 10% of the national population by the 2040s.[15] That demographic shift – along with tourism recovery and urban revitalization – will likely broaden the residential property market over time.
For equity holders, this moment offers a rare opportunity to reallocate efficiently – without giving up market exposure. Equity-backed financing can unlock capital quickly and quietly, letting investors seize early-stage momentum in a market underpinned by inflation, reform, and global demand. Land prices across Japan rose 2.7% in 2025 – the fastest pace since 2010 and the fourth straight year of increases.[16]
In a world shaped by geopolitical risk, inflation volatility, and tightening capital controls, Japan’s real estate market offers something increasingly scarce: accessibility, transparency, and durable upside.
[1] https://www.reuters.com/markets/asia/morgan-stanley-raising-about-680-million-japan-real-estate-fund-sources-say-2025-04-03/
[2] https://www.bloomberg.com/news/articles/2025-06-26/tokyo-s-rising-rents-show-inflation-cycle-deepening-for-boj
[3] https://www.bloomberg.com/opinion/articles/2025-05-26/it-s-too-easy-for-foreigners-to-buy-property-in-japan
[4] https://asia.nikkei.com/Business/Markets/Property/Tokyo-beats-New-York-in-record-quarter-for-Japan-real-estate-investment
[5] https://www.wsj.com/world/china/chinese-residents-move-japan-311d8557
[6] https://asia.nikkei.com/Spotlight/The-Big-Story/Japan-Inc.-s-25-trillion-yen-opportunity-Cashing-in-on-real-estate
[7] https://asia.nikkei.com/Business/Business-deals/Hong-Kong-s-Gaw-Capital-to-buy-mall-in-upscale-Tokyo-district-for-1bn
[8] https://asia.nikkei.com/Business/Markets/Property/Dai-ichi-Life-Marubeni-to-launch-2.8bn-Japan-property-fund
[9] https://asia.nikkei.com/Business/Markets/Property/Location-is-key-in-Tokyo-office-market-s-bifurcated-recovery
[10] https://asia.nikkei.com/Business/Markets/Property/Asia-fund-PAG-to-invest-7bn-in-Japan-real-estate-over-3-years
[11] https://www.hospitalityinvestor.com/asia-pacific/apac-hotels-defy-tariffs-woo-investors
[12] https://www.bloomberg.com/opinion/articles/2025-05-26/it-s-too-easy-for-foreigners-to-buy-property-in-japan
[13] https://asia.nikkei.com/Spotlight/Japan-immigration/Chinese-residents-in-Osaka-double-over-decade-buying-homes
[14] https://asia.nikkei.com/Spotlight/Chinese-in-Japan/Chain-of-Chinese-migration-for-education-thrives-in-Japan
[15] https://asia.nikkei.com/Spotlight/Japan-immigration/Japan-s-growing-foreign-workforce-offers-succession-lifeline
[16] https://asia.nikkei.com/Business/Markets/Property/Price-of-land-in-Japan-rises-2.7-as-tourism-drives-values
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