Kansai Apartment Market Forecast: Supply and price trends to watch for in 2021

The Real Estate Economic Institute (REEI) has released its 2021 forecast for supply and price trends in the new condominium market for the Kansai region, which consists of the prefectures of Nara, Wakayama, Kyoto, Osaka, Hyogo and Shiga.

Below are the key takeaways from the Kansai report.

For the Tokyo capital region report, please see: Tokyo Apartment Market Forecast: Trends to watch for in 2021

Supply in the Kansai region is forecast to increase by 29.5%

The REEI forecasts that developers in Kansai will release about 18,000 newly constructed apartments for sale in the region, which would be a a year-on-year of 29.5%. This percentage jump would be consistent with the growth forecast for the Tokyo capital region (of about 31%).

The forecast for Kansai would also bring new supply levels above those of 2019. Supply is forecast to increase in all areas of Kansai except for Nara prefecture.

Supply of new condominiums for 2020 for the Kansai region as a whole is estimated to total about 13,900 units, or a decrease of 23.0% compared to 2019. The sharp drop was due to the government’s emergency declaration and the slowdown in business as many developers chose to close model showrooms. The initial 2020 forecast for Kansai was about 17,000 units. In the greater Tokyo area, the 2020 supply drop is estimated to be only slightly lower than Kansai’s, at 21.9%.

High-rise developments in city of Osaka expected to continue growing

The REEI forecasts the following in specific areas:

  • In recent years, developers have consistently focused on high-rise developments in the city of Osaka. This trend is expected to continue.
  • Supply of 1K studio apartments, which have been popular with retail investors, fell sharply in 2020. Weakness in this segment of the market is expected through the first half of 2021.
  • In the city of Kyoto, where supply has been on a downward trend in recent years, developers are forecast to bring more and more medium-sized properties to market in 2021. Supply in Kyoto prefecture, outside the city of Kyoto itself, is also likely to increase significantly this year.
  • In Hyogo prefecture, supply of medium- and large-scale developments is expected to increase this year. In the city of Kobe, supply is also forecast to increase, especially in high-rise “tower” condominium projects.

Supply by prefecture and city in Kansai

  • Supply forecast by prefecture or city in Kansai:
    • Osaka city: 6,200 units (+10.3% YoY)
    • Osaka prefecture (excluding city of Osaka): 4,000 units (+18.0%)
    • Kobe: 1,700 units (+38.2%)
    • Hyogo prefecture (excluding Kobe): 3,000 units (+96.1%)
    • Kyoto City: 1,300 units (+54.8%)
    • Kyoto prefecture (excluding city of Kyoto): 700 units (+311.8%)
    • Nara prefecture: 400 units (-16.7%)
    • Shiga prefecture: 600 units (+3.4%)
    • Wakayama prefecture: 200 units (+42.9%)
    • Kansai region total: 18,000 units (+29.5%)

Average sales prices in 2020

For the Kansai region as a whole, the average sales price in 2020 was ¥42,490,000 ($412,000 USD), a year-on-year increase of about 9.9%. Average sales prices rose in every area except for Shiga and Wakayama prefectures.

Here is the breakdown of average sales prices by area for January to November 2020:

  • Osaka city: ¥42,260,000 (+14.9% YoY)
  • Osaka prefecture (excluding city of Osaka): ¥44,610,000 (+7.6%)
  • Kobe: ¥38,940,000 (+8.8%)
  • Hyogo prefecture (excluding Kobe): ¥47,180,000 (+0.9%)
  • Kyoto City: ¥39,640,000 (+12.3%)
  • Kyoto prefecture (excluding city of Kyoto): ¥32,960,000 (+4.6%)
  • Nara prefecture: ¥42,480,000 (+10.7%)
  • Shiga prefecture: ¥38,090,000 (-0.3%)
  • Wakayama prefecture: ¥36,460,000 (-15.7%)
  • Kansai region average sales price: ¥42,490,000 (+9.9%)

Average sales prices by square meter in 2020

  • Osaka city: ¥854,000 (+6.1% YoY)
  • Osaka prefecture (excluding city of Osaka): ¥617,000 (+7.9%)
  • Kobe: ¥628,000 (-2.9%)
  • Hyogo prefecture (excluding Kobe): ¥649,000 (+2.9%)
  • Kyoto City: ¥758,000 (+11.8%)
  • Kyoto prefecture (excluding city of Kyoto): ¥474,000 (+5.8%)
  • Nara prefecture: ¥572,000 (+14.4%)
  • Shiga prefecture: ¥527,000 (+2.1%)
  • Wakayama prefecture: ¥496,000 (-13.3%)
  • Kansai region average sales price per square meter: ¥698,000 (+2.6%)

The average price per square meter for January to November 2020 increased to ¥698,000 (+2.6% YoY), for eight consecutive years of growth.

Concerns about inventory build up (but there is pent up demand)

The REEI reports that construction starts from January to October 2020 were up 1.9% year-on-year for a total of 21,460 units, with inventory reaching 3,229 units at the end of November. This represents a 48.5% increase in inventory compared to the same period in 2019. This has caused some concerns of oversupply.

However, “completed inventory” for Kansai as a whole remains at a relatively low level of 1,241 units (+13.0% YoY). Completed inventory refers to condominium units which are already completely built when they are contracted for sales; the buyer is able to move in immediately to the unit. This is in contrast to the usual sales method for new construction, in which buyers contract to buy an apartment about a year before construction is actually completed and must wait to move in.

Since the state-of-emergency was lifted last May, there has been pent up demand from buyers both in Tokyo and the Kansai region, especially among workers or families who need to move immediately into an apartment where one or both adults can work from home.

Trends to watch for in 2021

  • Average sales prices in Kansai are expected to continue increasing this year.
  • Similar to the greater Tokyo area, more and more families are expected to move to the suburbs.
  • Due to continuing high prices in the city centers, supply will tend to increase around city peripheries, at least in the short term.
  • Demand for more spacious living spaces is forecast to increase due to strong demand for working from home.
  • In the city centers, competition with hotel developers has fallen which has caused land purchases for condominium development to become more active.
  • The number of condominium developers in Kansai from January to November 2020 dropped to 71 companies (compared with 80 companies for the same period in 2019).

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Source: Real Estate Economic Institute press release, December 21, 2020 (in Japanese)

Lead photo: Osaka skyline, via iStock