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Rent increase in Tokyo slowing down

Submitted by on Wednesday, 24 September 2008No Comment

The rents in Tokyo have been among the most expensive in the world for a long time now. However, surging rental prices in the Tokyo office district appear to be slowing down and according to many tenants of those offices, this comes not a moment too soon.

Rents for both residential and commercial properties have always been relatively expensive in cities like Tokyo, London and New York. However, these days with the dollar losing ground, property in New York is a relative bargain for foreigners based in countries with strong currencies.

Last year Tokyo experienced significant rent increases in the neighbourhood of 10%-20% in some cases during the height of the market. Rates have yet to come down, and a correction has not occurred at this point, however it does seem as though there is one looming, and it might arrive relatively soon.
During the second half of 2007 from the July – September period, rental prices increased by 4.1% and then only 1.5% during the October – December period.

Final figures are not available for the 1st quarter of 2008, however a local real estate broker stated, “Although the number of companies moving increases in the January – March quarter, ahead of the new fiscal year, this year there has been a drop in viewings.”

Expatriates and American companies both find it increasingly difficult to afford the high rental rates with American based incomes. While the dwindling US dollar rate hasn’t affected some renters, the high prices in Tokyo definitely have.

Companies that had plans to move locations, possibly to bigger spaces, have generally decided to stay put and remain where they are. With last quarter’s decline in rental rate price increases, some appear to be holding out for when prices actually start to decrease. Property investors and real estate experts seem to agree that a market correction may be on its way, but they are hesitant to make any speculative efforts as to how much of a correction will occur.

The five main Tokyo wards which experienced rental price spikes of 10-20% in 2007 were Shibuya, Shinjuku, Minato, Chuo, and Chiyoda. These are the districts being closely watched by everyone interested in real estate in Tokyo.

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