Surging property prices in Japan’s urban centers have prompted a buying spree of condominiums or apartments by individual investors seeking to profit from rental income or resales.
Bank loans that finance such ventures have soared to a record high of about 29 trillion yen ($190 billion).
However, the investment trend is not without its risks. And some worrying signs are starting to appear.
But for now, many people continue to ride the wave, including a 39-year-old self-employed man from Narashino, Chiba Prefecture.
In March, he bought a 38-year-old apartment building in Hanyu, a city of 52,000 in northeastern Saitama Prefecture, for about 26 million yen.
To finance the purchase, he secured a 20-million-yen real estate investment loan with a 35-year repayment term and an annual interest rate of 4 percent.
His path to property investment began two years ago, when he left his job as a civil servant. The birth of his child sparked a desire for a more flexible lifestyle.
“I don’t want to work all the time. I want to be home and watch my child grow,” he reflected.
After experimenting with stock trading and solar energy investments, he turned to real estate and began scouring online listings for promising opportunities.
Tokyo’s high prices pushed him to broaden his search, leading him to the listing in Hanyu: a four-unit apartment building located a 15-minute walk from the nearest train station. Each unit is a 1DK (one-bedroom with a dining kitchen).
By renting each unit at 42,000 yen per month, he can net an estimated annual income of roughly 1 million yen after loan repayments. As of now, all four units are fully occupied, marking a successful start to his new venture.
He’s confident that real estate prices will continue to rise. With a strategy of buying and selling multiple properties over time, he hopes to eventually acquire a newly built apartment in Tokyo.
“I want to become like the ‘warashibe choja’ (straw millionaire),” he said, referring to the classic Japanese folktale of a humble man who becomes wealthy through a string of fortunate trades, starting with a single piece of straw.
VARIABLE INTEREST RATES
Real estate investment loans are designed for buying newly built or secondhand condominiums and apartment buildings intended for rental income or resale.
They cater specifically to investment-driven property acquisitions, unlike housing loans typically used to finance personal residences.
While about 80 percent of homeowners opt for variable-rate mortgages, most of which carry annual interest rates below 1 percent, real estate investment loans come with significantly higher costs.
According to a banking industry source, variable rates for these investment loans generally fall within the 3-5 percent range.
The sector’s momentum is reflected in Bank of Japan data.
As of June, outstanding bank loans to “individuals engaged in rental housing operations,” a category aligned with real estate investment lending, hit a record 28.9 trillion yen.
New lending for such capital investments totaled 1.034 trillion yen in the April–June quarter, the second consecutive quarter for such loans to surpass the 1-trillion-yen threshold.
With average prices for newly built condominiums in Tokyo’s 23 wards now exceeding 100 million yen, real estate values across Japan continue their upward trajectory.
Rental rates are also rising, fueling investor interest in properties that promise strong yields and potential resale profits.
Hirokazu Fuchinoue of Condominium Asset Management Inc., which specializes in services for real estate investors, said the market is broadly split between domestic and overseas buyers, including a notable presence of Chinese investors.
Among domestic participants, salaried employees have emerged as key borrowers.
“Workers at IT firms, trading companies and financial institutions whose annual incomes have increased thanks to recent wage hikes are seeking to benefit from expected property price growth,” he explained.
BANKS RAMP UP LOANS
Financial institutions are intensifying their presence in the real estate investment market, drawn by the promise of robust interest margins stemming from comparatively high lending rates on investment loans.
Orix Bank Corp. reported a 30-percent year-on-year increase in its “mansion loans” during fiscal 2024. These loans typically fund single-unit condominium investments.
Its “apartment loans,” which cover entire buildings, surged by 40 percent.
Rakuten Bank Ltd.’s balance of “investment condominium loans” rose 20 percent year-on-year as of the end of June 2025.
“The number of newly built condominiums has declined, but that shortfall has been offset by an increase in the circulation of secondhand properties,” Rakuten Bank President and CEO Tomotaka Torin said, expressing confidence in continued market expansion.
FALLING YIELDS, DEFICITS
Real estate investment, however, carries significant risks.
Vacant units generate no rental income, and even occupied properties face challenges. Market rents can decline, and repair or maintenance expenses may exceed initial estimates.
Many investment loans are tied to variable interest rates, meaning that if the Bank of Japan continues to raise rates, borrowing costs will climb, increasing monthly repayments. In an economic downturn, property values could fall below their original purchase prices, eroding capital.
Another concern is the growing gap between acquisition costs and rental income. While property prices have surged, rents have not kept pace, leading to a decline in rental yields.
Financial planner Futoshi Fujikawa points out that in central Tokyo, a rising number of properties are now operating at a loss once loan repayments, management fees, and taxes are factored in.
In suburban and regional areas, the situation is even more precarious: lower rents make it harder to offset the relatively high burden of upkeep, and attracting tenants can be a persistent challenge.
“There’s a growing crowd eager to jump on the bandwagon, drawn by soaring property values in central Tokyo and the allure of real estate investment,” he said. “But the investment environment has entered a more challenging phase.”
The real estate investment loan market hasn’t been without controversy.
In Numazu, Shizuoka Prefecture, a scandal erupted over forged loan applications at and falsified documents at Suruga Bank Ltd. tied to financing shared house-style budget accommodations.
The incident sparked public outrage and raised concerns about oversight and transparency.
According to Japan’s National Consumer Affairs Center, while the overall number of consultation cases related to investment condominiums has been trending downward, there were 405 cases reported as of August in fiscal 2025, an increase of 62 from the same period the previous year.
Notably, over 60 percent of these inquiries came from individuals in their 20s and 30s, highlighting the growing interest—and vulnerability—of younger investors in the market.
DIFFERENT FROM BUBBLE ERA
The steady climb in real estate prices across Japan stirs memories of the asset-inflated bubble of the 1980s and early 1990s. Could another collapse be looming?
Shinichi Nishioka, chief forecaster at the Japan Center for Economic Research, said today’s market is fundamentally different.
He points to the rise of digitization and growth of the information and communications industry, which have created a new class of affluent individuals who actually reside in high-end condominiums.
“Unlike the bubble era, when optimism outpaced reality, today’s price increases are backed by genuine demand driven by structural changes in the economy,” he explained. “That’s why the current upward trend in housing prices is less likely to unravel easily.”
Still, Nishioka cautions that rising interest rates could trigger a retreat of investment capital.
“We must be vigilant about short-term volatility,” he said. “Japan’s population is shrinking, and housing demand will inevitably decline. The key question is whether the current market structure can hold.”
