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The Reversal of Interest Rates: Will Tokyo's Power Couples Survive (feat. Bubble Collapse Theory) [Deep Dive]
🇰🇷 South Korea /Economy & Trade

The Reversal of Interest Rates: Will Tokyo's Power Couples Survive (feat. Bubble Collapse Theory) [Deep Dive]

From Dong-A Ilbo · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

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  • Tokyo's housing market is experiencing unprecedented price surges, with new apartments in central wards exceeding $2 million and older units also seeing dramatic increases.
  • This boom contrasts sharply with stagnant wage growth, leading to concerns about a potential bubble, despite a decade-long rise fueled by ultra-low interest rates and the "power couple" demographic.
  • Foreign investors, particularly from Taiwan, are increasingly active in the market, drawn by the yen's weakness and seeking to diversify assets amid geopolitical tensions.

Tokyo's real estate market is defying demographic trends and rising interest rates, with apartment prices skyrocketing to levels previously unimaginable. New apartments in the 23 central wards now average over $1.6 million, a 11.3% jump from last year, and 19 wards have seen average prices surpass $900,000. The most desirable central districts now exceed $2.3 million, with even outer areas frequently hitting the $900,000 mark for new builds.

This dramatic surge, a 132% increase in new apartment prices since 2019, far outpaces the modest 12.6% wage growth for regular employees over the same period. Even older, pre-owned apartments have seen their average price more than double, reaching over $1.1 million. This phenomenon has created a "mansion era" where even two-income households struggle to afford homes in desirable areas, sparking debate about whether the market is experiencing a bubble.

It was really good timing. Now (prices are) too high to buy.

— KazuyaA buyer who purchased an apartment in the Harumi Flag complex, formerly the Olympic village, described his fortunate timing in securing a property before prices surged.

The current real estate boom, the most significant since the early 1990s bubble collapse, was reignited by the "Abenomics" stimulus policies starting in 2013, which introduced ultra-low mortgage rates. The COVID-19 pandemic further fueled the fire, as rising construction costs due to labor shortages and material price hikes, combined with a weak yen, increased building expenses by 30-40%.

Despite these rising costs, a demographic known as "power couples", dual-income households earning over $150,000 annually, have been major drivers of demand. Attracted by near-zero interest rates and tax benefits for home loans, and able to secure substantial mortgages, they have actively purchased new, centrally located apartments. Foreign investors, especially from Taiwan, are also a significant factor, accounting for about 10% of buyers. Many Taiwanese individuals, benefiting from the semiconductor boom and seeking to diversify assets due to cross-strait tensions, are snapping up Tokyo properties, which appear relatively affordable compared to Taipei.

Many of my clients say, 'I've made too much money, I don't know what to do with it.'

— Lin JiaqingLin Jiaqing, vice chairman of the Japan-Taiwan Real Estate Association, described the sentiment among Taiwanese investors.
DistantNews Editorial

Originally published by Dong-A Ilbo in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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