Tokyo remains the focus for most residential property investors in Japan but regional cities, such as Osaka, Nagoya, and Fukuoka are increasingly attractive to both domestic and foreign investors.
As we mentioned in this post, the yield spread between secondary cities and Tokyo narrowed in 2015 but other regions of Japan provide significant upside, together with easier access to deals compared with the highly competitive environment in Tokyo.
The following is the Real Estate Economic Institute’s (REI, 不動産経済研究所) forecast for the condominium market in the Kinki region (Osaka, Hyogo, Kyoto, Shiga, Mie, Nara and Wakayama prefectures). Please see this article for the REI’s Tokyo condominium market forecast for 2016.
Supply Forecast to Increase in 2016 by 7.5%
The REI estimates that in 2015, the supply of condominiums in the Kinki region was 18,600 units, a year-on-year increase of 1.1%.
Supply is forecast to increase by 7.5% in 2016 to 20,000 units, with an increasing concentration on high-rise tower developments in Osaka City.
Forecast supply for the Kinki region by major market is as follows:
- Osaka City: 7,700 units
- Osaka Prefecture (other than Osaka City): 4,100 units
- Kobe City: 2,800 units
- Hyogo Prefecture (other than Kobe City): 2,400 units
- Kyoto City: 1,500 units
The REI also sees large-scale developments being built in the suburbs of Osaka City, the Hokusetsu region (which includes the cities of Toyonaka, Ikea and Minoh) and Kobe City.
Low Inventory and Market Sentiment Pushed Prices Up in 2015
The stock of condominiums in the Kinki region from January to the end of November 2015 was approximately 2,133 units, which the REI notes is low.
The REI’s analysis is that the market’s perception of “good value” helped to push up sales in 2015 but that buyers may be getting ahead of themselves.
The average price of a condominium sold in the Kinki region from January to November 2015 was 37,070,000 yen (about $317,000), a year-on-year increase of 1.6%. This was the highest average price since 1993 when the average price was 38,790,000 yen.
Key Points for 2016: High construction costs, competition for land, upward pressure on prices
The REI sees the following major trends in 2016:
- Residential developers in Kinki, as in the greater Tokyo area, continue to face high construction costs and competition with hotel and office development will push up the price of land.
- Upward price pressure is forecast for high-rise residential developments in Osaka and for any development in Kyoto’s high-density city center.
- In the suburbs, sales of newly constructed houses that developers sell as a unit along with the underlying land are forecast to be strong, although prices for these residences have stabilized.
- Condominiums located near train stations will continue to be popular.
From January to November 2015, there were 107 companies developing condominiums in the Kinki region, an increase of five companies compared to 2014.
Source: Real Estate Economic Institute (Japanese)
Photo: View of Yodobashi and Nakanoshima, Osaka.
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