New or used? It's the most frequently asked question in Japanese real estate investment — and the most misunderstood.
Sales reps will always push new-builds: "no renovation risk," "guaranteed full occupancy," "powerful tax benefits." Hard to argue with, right? But when you put the data side by side, an interesting truth emerges: from a pure investment yield perspective, used properties almost universally outperform new builds.
That doesn't mean blindly choosing used is always right. This article uses data to clarify the real differences — and how to make smart decisions in Tokyo's 2026 market.
The Core Problem with New Builds: The New-Build Premium
New-build condos carry a structural issue called the new-build premium (新築プレミアム).
Simply put, 10–30% of a new-build's purchase price represents the developer's profit, advertising costs, and sales overhead. This has no corresponding market value. The moment you try to sell the property, it gets re-appraised by used-property standards.
Purchase price: ¥50M → Resale appraisal next year → ¥35M–¥45M
"In the red from day one" — that's the reality of new-build investment.
What the Yield Data Shows
Surface yields (表面利回り) for individually-owned condos in Tokyo's 23 wards (2025–2026 data):
| Property Type | Surface Yield |
|---|---|
| New-build (studio) | 3–5% |
| Used, under 10 years | 4.77% |
| Used, over 10 years | 5.12% |
| Used, over 20 years | 6.71% |
The gap is stark. A 20+ year-old used condo yields nearly 2 percentage points more than a new-build.
Surface yield isn't the whole story, of course. Used properties require deductions for repairs, management fees, and vacancy risk — typically reducing actual yield by 1–2 points. But even then, used property's 4.5–5.7% beats new-build's 3–5%.
New vs. Used: A Complete Comparison
New-Build Advantages (Real Ones)
- Zero down payment possible: Many banks offer 100% financing on new builds
- No immediate repairs: Everything is new; minimal unexpected maintenance costs
- 10-year defect warranty: Legal guarantee from the builder
- Strong tenant demand: "New-build" is a selling point that attracts tenants and supports higher rents
- Large depreciation deduction: Effective for high-income earners seeking tax optimization
New-Build Disadvantages (Often Overlooked)
- Inflated purchase price: 10–30% above actual market value due to the premium
- Negative cash flow is common: Monthly mortgage payment often exceeds rental income
- Sublease traps: "Guaranteed rent" contracts carry risks of rent reduction and forced termination
- Immediate value depreciation: Appraisal drops sharply the moment it enters the used market
Used Property Advantages
- Higher yield: Lower purchase price means better returns
- Positive cash flow is achievable: Rent income > mortgage payment is realistic
- Track record available: Historical vacancy rates, rent trends, and maintenance history
- Portfolio diversification: Same capital can cover multiple properties
Used Property Disadvantages
- Requires down payment: Typically 10–20% upfront; 100% financing is rare
- Renovation and repair costs: Pre-occupancy renovation plus potential increases in repair reserves
- Pre-1981 earthquake standards: Properties built before 1981 need seismic assessment
2026 Market Context: New Variables to Consider
The Bank of Japan's November 2025 report sounded a warning: expected investment yields on used condos in central Tokyo's three wards have fallen to approximately 2%.
The yield gap (rental yield minus long-term interest rate) is narrowing. With Japan's rate-hiking trend continuing, properties that look attractive at first glance may not actually cover financing costs in real terms.
2026 is not a year to buy broadly — it's a year for rigorous selection.
Choosing by Investment Goal
New-build suits you if:
- You're planning long-term holding (20–30 years) and can tolerate early paper losses
- You have no down payment and need 100% financing
- You're a high earner whose primary goal is tax optimization via depreciation
Used property suits you if:
- You want positive cash flow as soon as possible
- You're thinking 5–10 years with a flexible exit strategy in mind
- You want rental income + capital appreciation potential in Tokyo/Osaka growth areas
- You want to spread the same capital across multiple properties
Conclusion: The Sweet Spot Is "Recent Used" or "Renovated Property"
There's a third option that captures the best of both worlds: used properties from which the new-build premium has already been absorbed.
Specifically:
- 3–10 year-old used condos: Premium already stripped, condition still good, occupancy history available
- Renovated properties: Older age, but interiors and equipment are refreshed — high tenant appeal (check that renovation costs haven't been fully passed into the asking price)
One final rule that matters most: plan your exit before you buy. For new builds: "Who will buy this in 20 years?" For used: "Will this area be worth more in 5 years than it is today?" Without a clear exit, even a great-looking yield is just a number on a spreadsheet.
Data sources: Tokyo 23-ward individually-owned condo yield data (2025–2026), Bank of Japan Real Estate Market Report (November 2025)
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