New Home Prices in Japan Exceed 10 Times Annual Income

In Japan, the price increase of newly built residential buildings is becoming increasingly apparent outside of Tokyo. Against the backdrop of rising construction costs and land prices, sales prices have increased, with the average price in 24 prefectures, representing more than half of Japan’s total, exceeding 10 times the local annual income. Nationwide, newly built residential buildings are becoming unaffordable for ordinary working-class families.

The Tokyo-based real estate research company KANTEI compiled statistics on the average price of newly sold residential buildings in 2024 (based on a 70-square-meter unit) by prefecture, dividing it by the local average annual income to calculate the “price-to-income ratio.” The national average was 10.38, up from 10.09 in 2023, marking the second consecutive year it has exceeded 10.

A price-to-income ratio exceeding 10 means that it is very difficult for a family with only one working member to afford a new home. Takashi Shiozawa, director of MFS, the company that provides housing loan consulting services called “MogeCheck,” pointed out, “Considering a 35-year loan, a house price of 5 to 7 times annual income is more realistic. If it exceeds 8 times, life becomes difficult.”

In 2024, Fukushima, Okayama, and Kumamoto prefectures saw an increase of over 10 times the average price-to-income ratio, bringing the total number of prefectures with this ratio to 24, a 30% increase from 18 the previous year. Regardless of the prefecture, the trend of slow average annual income growth coupled with house prices rising at a faster rate than income growth is prominent.

The number of “over 100 million yen” (approximately 4.51 million yuan) apartments in regional cities is increasing, pushing up the average price of new homes. In Kumamoto Prefecture, where the price-to-income ratio is expected to exceed 10 in 2024, the “MJR Kumamoto Gate Tower,” a super high-rise residential building in front of Kumamoto Station built by companies such as JR Kyushu, is currently on sale.

The top-floor unit of MJR Kumamoto Gate Tower, a high-end project priced over 200 million yen (approximately 9.01 million yuan), is selling very well, “due to its prime location near the station, its status as a rare high-rise earthquake-resistant residential building in the prefecture, and the anticipation surrounding Kumamoto’s development following TSMC’s investment” (JR Kyushu). Buyers are reportedly predominantly wealthy individuals such as business owners and doctors, with about half purchasing second homes or for investment purposes.

At “Proud Tower Okayama” in Okayama City, all of the more than 300 units sold so far, including the highest-priced unit at 369.98 million yen (approximately 16.67 million yuan), were sold on the same day of registration. Buyers come from diverse backgrounds, including business owners, company directors, doctors, company employees, and civil servants.

At “The Leben Sapporo Odori MASTERS ONE” in central Sapporo, six high-floor units are priced over 100 million yen. Strong demand is reportedly driven by doctors and medical professionals.

The increase in high-end residential buildings across Japan is driven by rising construction costs. The Japan Construction Price Survey’s construction cost index shows that the cost of building reinforced concrete residential buildings has increased by 4-6% in the past year. High material prices and rising labor costs have had a significant impact.

Masayuki Takahashi, senior chief researcher at Tokyo-based KANTEI, points out, “Construction aimed at the mass market is not profitable, so real estate companies are starting to focus on high-priced housing for dual-income families, the wealthy, and the elderly seeking upgrades.”

Furthermore, there are differences in housing conditions between regional cities and central Tokyo. Tadashi Matsuda, senior chief researcher at the Real Estate Economics Research Institute, states, “The vast majority of houses in regional cities are detached houses. Residential buildings compete with hotels and other businesses for limited land, making land acquisition costs easily rise.”

Outside of major metropolitan areas like Tokyo and Osaka, the price-to-income ratio in the Tohoku region is high, exceeding 10 times in all five prefectures except Yamagata. Mitsui Fudosan’s “Park Homes Sendai Chuo” project in front of Sendai Station has attracted buyers primarily from families with actual needs, including office workers; reportedly, over 90% of the units have been sold. As of April 2024, the median price was around 70 million yen (approximately), with some high-rise apartments exceeding 200 million yen.

Yotomo Taguchi, chief economist at 77 Research Consulting, a firm specializing in the Tohoku region’s economy, stated, “In Miyagi Prefecture, it’s common for dual-income couples and married couples to take out loans together, leading to strong demand for high-priced housing.” However, he added, “It’s undeniable that housing prices have risen too much compared to the region’s average income, and the actual demand may not keep pace in the future.”