Rising property prices in Tokyo are creating a housing affordability crisis for young professionals.

Rising property prices in Tokyo are creating a housing affordability crisis for young professionals, making the dream of home ownership increasingly elusive. "I’m not sure ordinary people can buy a house anymore," said Mie Kawamata, a 31-year-old professional, who, after much searching, gave up on the house idea and bought an apartment about a third of the size that she’d wanted.

The surge in prices, driven by a flood of investment, has made central Tokyo apartments exceptionally expensive. "Housing prices and rents have risen a lot compared to the past, but in the end, salaries haven’t gone up that much," Kawamata lamented. The average price for a new condominium in central Tokyo skyrocketed by 60% to a record 129.6 million yen ($865,000) in the first half of the year, according to the Real Estate Economic Institute.

For locals, this surge has pushed Tokyo to become the second most unaffordable city globally, second only to Hong Kong, as reported in a UBS global real estate report. A 60 square meter (646 square foot) apartment in Tokyo now costs 15 times the annual salary of a skilled worker, compared to 10 times a decade ago. This puts Tokyo ahead of other major cities like London, Singapore, and New York in terms of affordability challenges.

Several factors contribute to this price surge, including low interest rates. However, a significant driving force is foreign buyers capitalizing on the weak yen, which is near a 33-year low, and seeking to diversify their investments, particularly away from China due to a real estate crisis and geopolitical concerns.

Foreign investors have poured more than 1.8 trillion yen into Japanese real estate since 2019, surpassing flows from institutional investors, property funds, and corporations. Cushman & Wakefield director Mari Kumagai notes that Japan is an attractive destination for property speculators, especially given its stability and the size of its economy.

In the past year, the average condo prices in central Tokyo have been pushed up further due to a substantial supply of high-end residences entering the market. One example is the Azabudai Hills complex, featuring Japan's largest office tower and approximately 1,400 residential units. This project has garnered attention from investors in Taiwan.

"Tokyo is still not that expensive compared to other big cities like Hong Kong and London," said Wang Mao San, president of Shingi-fusaya Realty Inc., emphasizing the market's attractiveness to wealthy Taiwanese investors who are snapping up Tokyo properties worth more than 100 million yen for second homes.

Super-wealthy Taiwanese buyers are acquiring Tokyo properties worth more than 100 million yen for second homes, while regular affluent investors are focusing on condos in the 30-70 million yen range in Tokyo and Osaka.

Despite the high prices, Tokyo remains more affordable than cities like Hong Kong and London. Luxury condos in Tokyo's upscale Motoazabu area, for instance, are priced at less than half of what they would cost in Hong Kong and are 45% cheaper than in London, according to data from the Japan Real Estate Institute.

However, for many like Mari Mochizuki, a single mother and music company salesperson, the relentless rise in apartment prices is a source of frustration. She's been searching for an apartment large enough to accommodate her piano and, potentially, a cat, but the options in the city center are either too expensive or in poor condition, forcing her to consider moving to the outskirts of the capital.

"It seems like prices for every apartment of decent size are blindly going up, even those in out-of-the-way areas or with surprisingly cheap interiors," she lamented, reflecting the challenges faced by many young professionals in Tokyo's housing market. By fLEXI tEAM