Published on and written by Cyril Jarnias
The war in Ukraine, though distant from Japan, has had unexpected repercussions on the Japanese real estate market. Fluctuations in energy prices caused by geopolitical tensions have influenced construction costs, creating a domino effect on real estate prices. Additionally, international investors seeking stability are increasingly turning to Japan, perceived as a safe haven in these uncertain times. This market dynamic raises crucial questions about the future of Japanese real estate, forcing stakeholders to rethink their strategies in a changing world.
The repercussions of the Ukrainian crisis on the Japanese real estate market
Impact of the crisis in Ukraine on the Japanese real estate market
Impact on foreign investments
Increased geopolitical tension and economic uncertainty due to the crisis in Ukraine are leading to a decrease in direct investments from Europe and Russia, while Japan is seen as a stable investment destination. The weakening yen trend and the perception of relative affordability of Japanese real estate are driving sustained investment demand, particularly in urban areas. However, if global economic instability persists, some foreign investors may prioritize risk reduction and withdraw from the real estate market.
Price fluctuations and construction costs
The invasion of Ukraine is causing an increase in the cost of raw materials and energy, which also raises construction costs in Japan. Shortages of essential imports like Russian timber and metals are putting upward pressure on new home prices. As a result, high housing prices impose a financial burden on potential buyers, which could unbalance supply and demand. Furthermore, in this context, the supply of new housing may be restricted, increasing the risk of a market shortage.
Government policies and responses
The Japanese government is promoting policies to attract foreign investment, such as deregulation and tax incentives, to maintain its appeal as a safe investment environment despite geopolitical risks. At the same time, stricter regulations on foreign land transactions are being implemented through amendments to the Foreign Exchange and Foreign Trade Act, to prevent fraudulent transactions and protect national territory. Through this dual strategy, the goal is to ensure the health and competitiveness of the real estate market.
Impact on domestic demand and demographics
Changes in population structure, also known as the 2025 problem—the decline in housing demand after the baby boomer generation and the increase in elderly people—are becoming evident outside urban areas. Additionally, global economic concerns due to the war and economic uncertainty could lead to a recession, worsening the vacant housing problem in the long term and further unbalancing supply and demand in rural regions. However, in major metropolitan areas, the link with job creation and infrastructure projects could maintain stable demand for commercial and residential spaces.
Good to know:
The Ukrainian crisis has notable repercussions on the Japanese real estate market, particularly through the withdrawal of some foreign investments, especially European and Russian, due to global economic uncertainty and imposed sanctions. This has led to a certain stability in real estate prices, despite global inflation. Furthermore, political instability has increased the cost of raw materials, directly affecting construction costs in Japan and making some projects less viable. In response, the Japanese government has adjusted its policies to offer a more favorable environment for foreign investors, while closely monitoring investment inflows to manage geopolitical risks. Additionally, these geopolitical upheavals combined with internal demographic trends, such as an aging population, influence domestic demand for housing and commercial spaces, creating a nuanced market dynamic.
The influx of Ukrainian refugees and their housing needs in Japan
Context and current situation of Ukrainian refugee reception
In response to Russia’s invasion of Ukraine in 2022, Japan partially modified its traditionally reluctant refugee reception policy to welcome over 2,000 Ukrainian refugees. This approach is seen as a result of Japan’s emphasis on cooperation with the international community and contribution to humanitarian aid. Quick and flexible measures were taken, including transportation by government aircraft and conversion of short-term visas into residence statuses allowing work. In major cities like Tokyo and Osaka, public housing was made available, concentrating many refugees.
Challenges and support system
Ukrainian refugees face difficulties adapting to daily life in Japan due to the Japanese language barrier and cultural differences. Additionally, the problem of underemployment persists due to limited job options. Local governments and NGOs offer support in various areas, such as Japanese language education, provision of public housing, and financial assistance. For example, the Nippon Foundation allocates a significant budget to living expense aid and living environment improvements, and some companies cooperate by providing vacant housing. However, these initiatives pose a sustainability challenge.
Impact on the real estate market
The direct impact of Ukrainian refugee reception on the real estate market is limited, but in some regions, an increase in demand for public housing has been reported. As countermeasures to insufficient housing supply, the construction of new housing models and improvements to rental systems are also being discussed.
Integration and long-term prospects
In the future, it is essential to expand educational opportunities and create stable jobs. It is necessary to implement comprehensive policies aimed at self-sufficiency while supporting linguistic and cultural aspects. Furthermore, it is also hoped that the knowledge gained from this experience will help develop a model case for building a multicultural coexistence society.
Good to know:
Since the start of the war in Ukraine, Japan has welcomed over 2,000 Ukrainian refugees, mostly concentrated in Tokyo, Osaka, and Nagoya. Historically, Japan has been unfamiliar with hosting refugees, posing significant housing challenges, especially given administrative and language barriers. The Japanese government has implemented support policies, collaborating with NGOs to provide temporary housing and sustainable solutions, though this remains problematic due to limited housing supply. Initiatives include subsidies and municipal housing, but these efforts have put pressure on the local real estate market, while conversely stimulating opportunities for innovations such as modular housing. The longevity of refugee integration depends on establishing sustainable access to housing, which requires acculturative awareness and new urban policies, offering these families long-term stability while simultaneously contributing to promising social diversity.
Geopolitical issues and real estate investment strategies in Japan
Impact of the war in Ukraine on the Japanese real estate market
Russia’s invasion of Ukraine has significantly increased geopolitical tensions and also influences the Japanese real estate market. Specifically, rising energy prices and construction material costs are leading to higher costs for new residential and commercial buildings, putting pressure on overall real estate prices. Additionally, due to uncertainty, investment demand in areas considered safe havens has increased, driving up land prices in some regions. These phenomena are particularly pronounced in interaction with economic factors such as yen depreciation or shortages of imported timber.
Geopolitical risks and investor behavior
Both foreign and Japanese investors place great importance on geopolitical risks in their decisions. For foreign investors, interest in properties located in secure urban areas is growing, with a trend toward increased demand for luxury housing or commercial buildings. In contrast, Japanese investors tend to strengthen their diversification strategy both domestically and internationally, while focusing on certain sectors such as properties near defense infrastructure. These changes also occur in the context of sanctions between countries and supply chain disruptions due to trade regulations.
Risk reduction strategies and priority sectors
- Diversified portfolio: Diversified selection of properties by region and use.
- Use of intelligence: Forecasting market changes through analysis of the latest data.
- Properties near defense facilities: Maintaining certain demand even in geopolitical crisis situations.
In these strategies, downtown office buildings, luxury apartments, and high-performance earthquake-resistant logistics facilities are considered important.
Response measures by the Japanese government
The Japanese government aims to stabilize the domestic real estate market in an uncertain international context by promoting multidimensional policies. For example, there are supports for strengthening supply chain resilience based on the Economic Security Promotion Act and measures to promote the adoption of renewable energy. Additionally, international cooperation efforts to reduce uncertainty continue, and improvements to the investment environment are also expected. Such measures contribute to maintaining market confidence.
Good to know:
Geopolitical tensions stemming from the war in Ukraine have led to increased caution among real estate investors in Japan, particularly impacting the decisions of foreign players amid global economic volatility. These regional conflicts prompt a reassessment of risks, pushing investors to favor assets considered safe, such as high-quality residential properties or those in stable neighborhoods of Tokyo and Osaka. To mitigate risks, some adopt more diversified strategies and turn to real estate funds or infrastructure investments, which sometimes benefit from government support. The Japanese government, aware of growing uncertainties, has implemented policies aimed at stabilizing the real estate market, including through tax incentives and historically low interest rates, even encouraging the development of smart and energy-efficient housing to stimulate demand.
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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.
