Real Estate Investment Opportunities in Sendai, the Largest City in Tohoku Region
The number of wealthy individuals and investors purchasing real estate in Japan is increasing worldwide. Recently, interest has extended beyond popular tourist areas like Tokyo, Osaka, Kyoto, Hokkaido, and Okinawa to other regions as well. One such area is Sendai City, the largest economic city in the Tohoku region. In this article, we will discuss the benefits and considerations of investing in real estate in Sendai.
It may be challenging for foreign investors to find information on Japan's regional cities, but this article will help you understand the potential of real estate investment in Sendai. With land prices rising for 12 consecutive years, we will also introduce recommended areas for purchasing apartments that can yield good returns on investment in Sendai. Please use this guide as a reference.
Sendai City: The Central City of the Tohoku Area
First, let's introduce an overview of Sendai City, including the entire Miyagi Prefecture. Sendai City is one of the most livable cities in the Tohoku region of Japan, with relatively little snowfall. Understanding the area's geographical features, historical background, and objective data is crucial for successful real estate investment.
1. About Miyagi Prefecture and Sendai City
Miyagi Prefecture is located approximately 300 kilometers northeast of Tokyo, Japan's capital, at the heart of the Tohoku region. It takes about an hour and a half to reach Tokyo by Shinkansen. The prefecture faces the Pacific Ocean to the east and is blessed with rich fishing grounds and picturesque tourist spots such as Matsushima, one of Japan's Three Scenic Views.
The prefecture also boasts popular hot spring areas like Akiu Onsen and Naruko Onsen. Naruko Onsen is especially known for its beautiful autumn foliage, attracting many tourists every year. Naruko Onsen is also famous as the birthplace of "kokeshi," traditional wooden dolls that have become popular souvenirs among foreign tourists. Historical figures such as the samurai warrior Date Masamune from the Sengoku period are well-known and may be familiar to those who enjoy Japanese games and anime.
Sendai City, the focus of this article, is the capital of Miyagi Prefecture and the only designated city in the Tohoku region. It is the largest economic city in the Tohoku area, comprising five administrative districts: Aoba Ward, Miyagino Ward, Wakabayashi Ward, Taihaku Ward, and Izumi Ward. The city is known as the "City of Trees" due to its harmonious blend of urban functionality and natural beauty.
Additionally, Sendai is known for hosting the "Sendai Tanabata Festival," one of Japan's three major Tanabata festivals. This festival, held every August, decorates the city with beautiful Tanabata decorations, attracting many tourists from both domestic and international locations. The coexistence of traditional culture and modern urban features makes Sendai an attractive region for real estate investment.
2. Population Size and Land Price Trends in Sendai City
Sendai City has a population of approximately 1.09 million, with nearly half of Miyagi Prefecture's residents living in Sendai. This makes it a high-demand area for housing within the prefecture.
The land price trends in Sendai City are on the rise for both residential and commercial areas. According to the 2024 land price survey, residential land prices in Sendai increased by 7.0%, and commercial land prices rose by 7.8%. The land price increase rates for Sendai City and Miyagi Prefecture as a whole are as follows:
* The numbers in parentheses are the average change rates from the previous year.
Land prices in Miyagi Prefecture and Sendai City have been rising for 12 consecutive years, and this trend is expected to continue. For overseas investors considering real estate investment, Sendai City is a highly recommended area.
Four Recommended Areas for Apartment Investment in Sendai
Here, we introduce four particularly recommended areas for real estate investment in Sendai. We will discuss the redevelopment status and the target demographics for purchasing investment apartments, so please use this as a guide.
1. Aoba Ward
Aoba Ward in Sendai City is a key area to focus on when considering real estate investment. This ward is home to "Sendai Station," the largest terminal station in the Tohoku region, providing excellent access to both within and outside Miyagi Prefecture.
Aoba Ward has the largest population in Sendai City and houses public institutions such as the Miyagi Prefecture Government and Sendai City Hall, as well as branch offices of central government agencies. Additionally, there are numerous corporate branches and educational institutions, including Tohoku University, Tohoku Gakuin University, and Tohoku Fukushi University, contributing to the region's vibrant economy and culture. The area is well-connected by public transport, making it a convenient and livable environment.
Furthermore, Aoba Ward has a diverse population ranging from single individuals to families, resulting in high demand for rental apartments. This makes it a region where stable rental income can be expected from real estate investments. The quality of housing in Aoba Ward is high, and the livability is highly rated, which means that future asset value appreciation can also be expected. The real estate market in this area is expected to continue to have stable demand, making it a highly attractive area for investment.
2. Taihaku Ward
Taihaku Ward in Sendai City, like Aoba Ward, is a vast area extending east and west, with rich natural environments in the west and developed urban areas in the east. The central part of the urban area, known as "Nagamachi Subcenter," is a bustling area with commercial facilities and restaurants.
The ward offers high convenience for transportation, with the Tozai and Nanboku Subway Lines and JR Tohoku Main Line and Joban Line passing through, making commuting, school, and shopping convenient. Additionally, it offers good access to Sendai Airport, serving as the air gateway to the Tohoku region. The availability of the Nanboku Subway Line, JR Tohoku Main Line, Tohoku Expressway, and National Route 4 adds to the convenience of traveling by car.
Taihaku Ward features natural attractions such as "Akiu Onsen," amusement parks, and zoos, making it a rich natural environment. The ward also hosts the first IKEA store in the Tohoku region, providing convenient shopping for furniture and home goods.
From a real estate investment perspective, Taihaku Ward can meet various needs. Apartments for students and singles are in stable demand due to the convenient transportation and ample commercial facilities. For families seeking a natural environment, properties with spacious layouts and gardens are popular. The Nagamachi Subcenter area is expected to develop further, and property prices are anticipated to rise. Considering these factors, Taihaku Ward is an attractive area that can accommodate diverse investment strategies.
3. Miyagino Ward
Miyagino Ward is located in the northeast part of the city, extending from the east side of Sendai Station to Sendai Port. It is home to the "Rakuten Kobo Stadium Miyagi," the base of Japan's professional baseball team, the Rakuten Golden Eagles.
The coastal area features large commercial facilities like the "Sendai Uminomori Aquarium" and Mitsui Outlet Park Sendai Port, making it a popular weekend destination for families. The "Sendai Station East First District First Class Urban Redevelopment Project" is also underway, with large condominiums being constructed one after another.
As redevelopment continues around Sendai Station, population influx is expected, leading to increased demand for rental properties. For real estate investment, it may be worth looking for properties in the area around Rikuzen-Yamashita Station, which is close to Sendai Station.
4. Izumi Ward
Izumi Ward is located on the northern side of Sendai City and is a popular area with a rich natural environment. It features Izumigatake Ski Resort, where visitors can enjoy winter sports during the snowy season and outdoor activities and leisure during the off-season.
Additionally, Izumi Ward is home to the "Yurtec Stadium Sendai," the base of Japan's professional soccer team, Vegalta Sendai. Established in 1997, the stadium has a history of nearly 30 years. The "Sendai Izumi Premium Outlets" shopping center is also located in this ward, attracting visitors from both within and outside the prefecture.
The main transportation hub in Izumi Ward is the Sendai Subway Izumi-Chuo Station. Since it takes about 20 minutes from the city center, real estate prices are relatively low compared to other parts of Sendai City. Considering future population decline, rather than purchasing investment properties, it may be worth considering this area for purchasing a second home if you have a strong preference for Sendai as a city.
Three Benefits of Real Estate Investment in Sendai
There are several strengths in real estate investment in Sendai that have caught the attention of overseas investors. Here are three benefits, based on historical data, of investing in real estate in Sendai.
1. High Demand for Rentals Due to Low Home Ownership Rate
The home ownership rate in Sendai City is relatively low at 46.7%, compared to the national average of 61.2%. Additionally, the percentage of private rental housing is 42.9%, higher than the national average of 28.5%.
The reason for this may be that there are many single-person households with a lower proportion of home ownership. The demand for rentals is high across Japan, so investing in single-room apartments for individuals is a promising option.
Source: Sendai City Urban Development Bureau Housing Policy Division｜Analysis of the Housing Situation in Sendai City
2. The Leading Economic City in the Tohoku Area with Rising Land Prices
Sendai City is the only city in the Tohoku region with a population exceeding 1 million. It is more than three times larger than Fukushima Prefecture's Koriyama City, the second-largest city in the Tohoku region, which has a population of about 320,000, making it the largest city in the Tohoku region.
Additionally, as the only designated city in the Tohoku area, Sendai is a vibrant city with a concentration of offices and educational institutions. The land prices in Sendai City have been rising for 12 consecutive years.
The large population and rising land prices are significant factors in determining whether to invest in real estate. Since Sendai City meets both of these criteria, it is an area well-suited for real estate investment.
3. Higher Rental Prices Compared to Other Regional Core Cities
According to a survey by Haseko Livenet, a company that manages apartment buildings, Sendai City ranks first in rental prices among five regional cities (Sendai, Sapporo, Fukuoka, Hiroshima, and Kitakyushu).
Rent for single occupancy types in Sendai City is the highest at 73,000 yen, surpassing Hiroshima City's 71,000 yen and Sapporo City's 65,000 yen. For two-person household types, Sendai City also ranks first at 101,000 yen, higher than Hiroshima City's 91,000 yen and Fukuoka City's 96,000 yen.
Higher rents for apartments or condominiums can result in substantial rental income, making Sendai City particularly suitable for real estate investment among regional cities.
Source: Nikkei｜Rental Market Trends in Five Regional Cities, Sendai City Tops the List
Points to Consider When Investing in Real Estate in Sendai
When investing in real estate in Sendai, there are geographic and area-specific factors to consider. To begin real estate investment in Sendai with minimized risks, it is essential to understand the following points beforehand.
1. Natural Disasters like Earthquakes and Tsunamis
This is not unique to Sendai, but Japan faces risks from natural disasters such as earthquakes and typhoons. The 2011 Great East Japan Earthquake is a recent reminder, with Sendai City experiencing significant damage, especially along the coast. While reconstruction efforts are ongoing and the citywide disaster prevention measures are in progress, it is crucial to always consider the risk of natural disasters when investing in real estate in Japan.
As a fundamental rule when choosing properties, we recommend purchasing apartments or houses built according to the new earthquake-resistant standards implemented after June 1981. Buildings constructed under these standards are designed to withstand stronger earthquakes, providing a sense of security.
2. Vacancy Risk
While Sendai City has a large population and high rental demand, there is a risk of an oversupply of housing leading to increased vacancies. As of 2018, the vacancy rate in Sendai City was 11.1%, lower than the national average of 13.6%. In 2008, Sendai City's vacancy rate was 15.3%, which was higher than the national average of 13.1% during that period.
Choosing the right area and property is essential to avoid long periods of vacancy and ensure stable income. Start by investing in areas like Aoba Ward in Sendai City, where rental demand is expected to remain strong.
Source: Sendai City Citizens Bureau and Urban Development Bureau｜Current Status of Vacant Houses in Sendai City
Jul 25, 2024