TOKYO’S condo market is showing early signs of cooling after policy tweaks by the Bank of Japan (BOJ) spurred speculation that mortgage burdens may rise, prompting some homebuyers to think twice before purchasing.

The number of existing apartments up for sale in central Tokyo’s popular bay area rose for two straight weeks in January — the first back-to-back increases since April, according to real estate broker Wangan Mansion Kakaku Navi. Second-hand apartments for sale in the city’s 23 districts jumped more than 30 per cent in January from a year earlier, the most in 10 years, Tokyo Kantei figures show.

It’s way too soon to conclude that the figures spell doom for the Japanese capital’s housing recovery. But the Tokyo Bay area, brimming with high-rise apartments in locations like Toyosu and Kachidoki, is seen as a bellwether for the broader market because residents are known to buy them both as a place to live and assets to speculate on.

“There is a growing sense of alarm among buyers,” said Shogo Fujita, an apartment adviser at Wangan Mansion Kakaku Navi. He pointed to rising long-term interest rates following the Bank of Japan’s decision to widen its cap on 10-year bond yields in December.

In Japan, mortgage holders haven’t had to worry about rising interest rates for more than a decade, with the central bank keeping borrowing costs at rock-bottom levels to combat deflation. But now, with consumer prices climbing the most in four decades and a new BOJ governor set to replace Haruhiko Kuroda in April, there is growing speculation for a policy shift.

“The biggest concern is that more buyers will negatively perceive the increased burden on households due to rising interest rates and inflation,” while wage hikes lag behind, said Shun Ogishima, a researcher at Sumitomo Mitsui Trust Research Institute. “That will probably lead some to hold off on purchases.”

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At the same time, Ogishima said it’s not surprising to see more owners put properties on the market as uncertainty increases. “Investors may feel anxiety due to a strong concern that prices may fall in the future, and some may decide to sell while they still can,” he said.

With interest rates on bonds and bank deposits so low, individual investors in Japan have flocked to real estate to eke out returns. Yet condos could become less attractive if policy normalisation makes bonds more profitable, said Masayuki Takahashi, chief analyst at real estate information provider Tokyo Kantei.

“A growing number of people have decided that it’s time to sell,” taking a cue from the BOJ’s December action, Takahashi said. Some investors were already starting to divest in the preceding months thinking that home prices might peak soon, he said.

To be sure, the downturn has yet to spill over into newer properties or luxury condos, and few owners are willing to lower prices, Takahashi said. “What’s going on is nothing like the bursting of the bubble in the 1990s,” he said, in reference to the dramatic crash in Japanese real estate three decades ago.

And the government’s surprise pick to be the next BOJ chief, Kazuo Ueda, quelled concerns for a sudden tightening of monetary policy when he said last week that the central bank’s stimulus should stay in place.

Mika Kasamatsu, a deputy editor at Recruit’s Suumo Research Center, also said higher interest rates won’t necessarily prompt investors to sell unless they rise steeply. That’s partly because they may already be renting out rooms to earn income, and could struggle to find reasonably priced condos to invest in after cashing out, she said. BLOOMBERG