Japan’s central bank has raised its main interest rate to 1.25%, the highest level in 31 years, in response to rising inflation and economic pressures. This marks the sixth increase since 2024 as the Bank of Japan moves away from ultra-low borrowing costs. What is confusing to many is they are trapped in the Keynesian Economics World that even former Chairman Paul Volcker declared in his Rediscovery of the Business Cycle failed in ’70s.
Japanese real estate prices have continued to rise even as interest rates climb, but the long-term idea that if rates rise, demand falls, have never quite worked as advertised. Rising rates when you are coming off a low do not have a negative impact. When the US real estate was down, I warned that it would start to rise with the first uptick. Some commented I lost my mind. They have about ZERO understanding of human nature. People are not as stupid as some pundits. When mortgage rates kept declining, there was no rush to go buy because it will be cheaper tomorrow. With the first uptick, there was a surge in mortages because they saw the trend change.
We are looking at real estate markets generally with a strong demand and supply constraints. This is unfolding in several countries including Japan. Higher borrowing costs are not simultaneously creating signs of strain, particularly in transaction volumes and buyer affordability.
Prices Are Still Rising
Official data confirms broad price growth across 2026. We will see a significant change next year in 2027.
Official Land Prices
The national average for all land-use types rose 1.5% in the 2026 benchmark land price survey, marking the fifth consecutive year of increase. The three major metropolitan areas saw a 4.4% rise, driven by a 5.4% increase in the Tokyo area.
Condominium Prices
In the Tokyo metropolitan area, the asking price for existing condominiums rose 25.8% year-on-year in September 2026, the 26th consecutive month of increase.
We have a Directional Change next year and high volatility. This could be the peak in real terms for 2026.