Published on and written by Cyril Jarnias
In an ever-evolving economic landscape, many property owners in Japan are grappling with the crucial question of whether to monetize their investments through Airbnb versus traditional long-term rentals. This dilemma is particularly interesting when considering Japan’s unique cultural and tourism dynamics, which influence the profit potential of each option.
This article provides an in-depth analysis of the profitability of Airbnb rentals compared to long-term leases, examining economic data by city across the country. It offers a detailed look at the financial advantages and drawbacks inherent in each method, aiming to help property owners make informed choices that will maximize their rental income.
Analysis of Short-Term Rental Yields in Japan
Profitability Comparison Between Short-Term and Long-Term Rentals in Major Japanese Cities
Financial Profitability of Short-Term and Long-Term Rentals: In Tokyo, Kyoto, Osaka, Sapporo, etc., short-term rentals can generate high income during peak tourist demand periods. However, operating costs and regulatory compliance pose challenges.
| City | Average Nightly Price (Airbnb) | Average Monthly Rent (Long-Term) | Annual Difference |
|---|---|---|---|
| Tokyo | ¥29,142 | ¥150,000 | +30% |
| Kyoto | ¥25,800 | ¥120,000 | +22% |
| Osaka | ¥18,500 | ¥100,000 | +15% |
For example, in Tokyo, with an average price of around ¥29,142 per night and high occupancy rates, profits can often be realized over short periods. On the other hand, long-term rentals offer stable cash flow, but due to lower rates, overall profitability may decrease.
Economic Factors and Regulation: The short-term rental market is heavily influenced by:
- Tourist demand
- The ability to adapt to seasonal variations (e.g., cherry blossom season)
- Strict local regulations
Market Trends and Post-COVID-19 Impact
Post-COVID-19 Recovery Situation: During the COVID-19 pandemic, the sharp decline in tourist numbers severely impacted the minpaku industry as a whole. However, the Japanese government has set a target of 60 million international tourists by 2030.
Implications for Investors: After a prolonged pandemic, many hosts have turned to flexible and smart pricing strategies (such as increasing prices during peak periods).
Good to Know:
In Tokyo, renting via Airbnb can generate an annual return 30% higher than long-term rentals, especially during peak tourist demand, but requires navigating strict regulations that limit short-term stays. In Kyoto, seasonal rentals face additional restrictions aimed at preserving local heritage, while in Osaka and Sapporo, seasonal variations strongly influence prices, with winter months being particularly profitable due to snow tourism.
Comparison Between Airbnb and Long-Term Rentals
Comparison Between Airbnb and Long-Term Rentals in Japan
1. Analysis of Potential Income for Property Owners
When using Airbnb, in tourist areas or cities, high income in a short time can be expected. For example, in Tokyo, the average number of nights rented is high, and the nightly rate is relatively expensive.
2. Occupancy Rates and Associated Costs
| Cost Type | Airbnb | Long-Term Rental |
|---|---|---|
| Cleaning | High (frequent) | Low (rare) |
| Maintenance | Moderate | Low |
| Management | High | Moderate |
3. Tax and Legal Impact
In Japan, there are complex regulatory compliance obligations such as observing the Vacation Home Law (Residential Lodging Services Law) and permit application procedures.
4. Impact of Tourist Seasons on Prices and Demand
- Golden Week: high Airbnb demand
- Summer vacation: high rates
- Low season: risk of vacancy
Good to Know:
In Japan, property owners can generate significant income through Airbnb, especially in major cities like Tokyo and Osaka where tourism is thriving, although occupancy rates fluctuate with the tourist season, impacting returns. In comparison, long-term rentals offer financial stability with high occupancy rates, particularly valued in less touristy regions, but generally generate lower monthly income than Airbnb.
Rental Contracts in Japan: Specifics and Implications
Types of Leases in Japan and Legal Implications
Ordinary Lease is the most common form of rental contract in Japan, with a fixed term typically exceeding one year (often two years).
Fixed-Term Lease does not allow automatic renewal upon expiration of a predefined period, requiring a new contract to be signed.
Security Deposit and Subletting Issues
The security deposit (敷金) functions as an allowance for repair costs or unpaid rent and is typically settled upon refund.
Impact on Real Estate Investment and Differences Between Cities
| City | Preference for Ordinary Lease | Preference for Short-Term Lease |
|---|---|---|
| Tokyo | 60% | 40% |
| Osaka | 55% | 45% |
| Kyoto | 50% | 50% |
Good to Know:
In Japan, rental contracts can be fixed-term (conventional) or indefinite (ordinary), involving distinct rights and obligations for tenants and landlords, such as renewal rights for tenants under ordinary contracts. Security deposits, often high, cover repairs and non-payment, while contract termination typically requires two to six months’ notice.
Discover the extraordinary potential of international real estate with our personalized support. Leverage our expertise to invest wisely and maximize your investments in the global market. Feel free to contact me for tailored advice and unique opportunities suited to your needs. Meet a dedicated specialist who will guide you through every step of your international real estate project and turn your ambitions into success.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
