For foreign buyers looking at Japan today, the conversation has quietly shifted. The question is no longer whether Japan remains a safe and investable market — that has largely been settled — but where, within Japan, capital is working hardest now. While Tokyo continues to dominate headlines, investor behaviour tells a more nuanced story, with growing attention on secondary cities offering clearer income visibility and more balanced risk-return profiles.

Tokyo’s recovery remains real and structurally sound, supported by deep liquidity and institutional demand. However, for overseas buyers — particularly those prioritising rental stability and entry pricing — the city is no longer the only logical gateway. For Singapore-based investors, secondary cities such as Osaka and Kyoto offer strong fundamentals, where investment outcomes are often more transparent.

This shift is no longer fringe. It reflects changing demand patterns, shifting tourism flows and a maturing short-stay rental ecosystem.

Short-stay demand is stronger outside Tokyo than many expect

While Tokyo’s core appeal lies in its liquidity, global visibility and long-term appreciation, these qualities come with high entry pricing and compressed yields that can make short-term cash flow strategies less compelling for investors. Osaka and Kyoto, in contrast, are more accessible price-wise and offer a diversity of asset types, from refurbished traditional housing to purpose-built short-stay developments.

In Osaka, a typical short-term rental generated a median annual revenue of about JPY4 million ($32,400) over the past year, with an 88% occupancy rate and roughly 12,000 active listings. Average annual revenue for Airbnb listings in Kyoto was even higher at around JPY5 million, with an 82% occupancy rate between late 2024 and late 2025. What matters here is not peak performance, but consistency of demand — something income-focused investors increasingly prioritise.

These figures also compete impressively with major global short-stay markets and highlight why refurbished properties in these two cities are gaining attention. One of the more under-appreciated stories in Japanese real estate — and one that international buyers are starting to price in — is the value uplift from refurbishment and conversion of existing stock for hospitality use.

Refurbishment iswhere secondary cities create an edge

Japan has a sizeable inventory of older buildings and vacant properties, especially outside central Tokyo. Investors are acquiring these assets at attractive prices, then renovating or retrofitting them into short-stay rentals, boutique hotels and serviced apartments, thereby effectively unlocking value that Tokyo’s hyper-priced new developments cannot match.

Refurbishment and hospitality conversion sharpen this advantage in three ways:

• Lower acquisition costs — older buildings in regional hubs tend to trade well below Tokyo’s per sq m prices
• Strong operational cash flows — as the revenue and occupancy data from Osaka and Kyoto show.
• Value uplift through renovation — turning underused or depreciated stock into revenue-producing hospitality assets.

*This article was first published in Edgeprop on 12 February 2026.