Market Overview

Based on new rental housing starts, the rental housing market was valued at 308,906 units in FY2025. This was 86.5% of the market's size in the previous fiscal year.

Due to continuously high construction costs combined with rising interest rates, the profitability of rental housing investments has deteriorated, which has seemingly reduced the new rental housing starts.  

Rural areas are experiencing rising vacancy rates, while urban areas with rising rents have limited rental residences that can be profitably rented out due to rising construction and borrowing costs.

Noteworthy Topics

Advancements in New Rental Residences Toward Medium- to High-Story Buildings in Urban Areas with High Added Value and Response to Demand for ZEH and Energy Savings

Newly built rental residences have evolved from traditional, low-story apartments to medium- to high-story condominiums that are optimal for urban areas. These residences offer higher value and respond to the demand for ZEH and energy savings.

The medium- to high-story condominiums are the result of demand for making more effective use of urban lands. Some of these residences allow for combined usage, accommodating both residential and commercial purposes, such as stores and offices. 

The high added value of these rental residences is represented by stylish design, seismic resistance, sound insulation, and disaster and crime prevention. A growing number of new rental residences offer these features to attract renters.

Environmental friendliness is becoming an increasingly important selling point. The concept has expanded to include enhanced thermal insulation, high-efficiency equipment installation, solar power use, and decarbonization performance. Additionally, there is the "ZEH-M," or zero-emission mansion. In Japan, "mansion" refers to condominiums. These features benefit residents by reducing energy costs and improving comfort. They also help residence owners maintain future competitiveness and increase their property's value.

Future Outlook

Based on new rental housing starts, the domestic rental housing market is expected to be valued at 219,300 units in FY2040, which is a 29% decline from FY2025.

The market is expected to shrink due to the anticipated future decrease in population and household numbers.

However, due to robust predicted demand, primarily in urban areas, rental residences are expected to be concentrated in convenient locations, such as urban areas and areas close to railway stations, where rent levels and demand are high.

Research Outline