Kansai Condominium Market Forecast 2020: Osaka, Kyoto, and Kobe Supply and Prices

The Real Estate Economic Institute (REEI) has released its 2020 forecast for supply 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 report.

For the Tokyo capital region, please see: Tokyo condominium market forecast 2020

Kansai Region Forecast

• Developers are expected to release 17,000 newly constructed units for sale in 2020, an increase of 1.2% year-on-year.
• For the 2019 full calendar year, 16,800 units are forecast. This would be a year-on-year decrease of 19.8%, and below the forecasted number, due to higher than expected sales prices and the negative effects of the October 1st consumption tax increase.
• Average sales prices in 2020 are expected to continue to increase.
• Forecast by city in Kansai:
  • Osaka City: 7,700 units (-7.5% YoY)
  • Osaka suburbs: 3,400 units (-8.8% YoY)
  • Kobe: 1,900 units (+26.7% YoY)
  • Hyogo prefecture, excluding Kobe: 1,700 units (+6.3%)
  • Kyoto City: 1,300 units (+54.8%)

Big increase expected in supply of high-rise condominium buildings in central Osaka

• There was a supply gap in 2019 of high-rise condo buildings in Osaka, but developers are expected to release a large number of skyscraper units in 2020.
• In the last few years, 1K studio apartment units for investment purposes have been a notable characteristic of the Osaka new condo market, as these property types are seen to be competitive with new hotel construction. Next year, the REEI sees 1K-sized investment properties spreading to the suburbs, as well.
• There has been a declining trend in new condominium development in the city of Kyoto, but next year may see mid-sized developments in both the city center and suburbs.
• Supply of mid- and large-scale developments are forecast to increase supply in Kobe and throughout Hyogo prefecture.

Supply is still low

• Construction starts from January to October 2019 totaled 21,060 units, falling 4.4% compared to the same period in 2018.
• November 2019 total inventory was at 2,174 units, down 17.9% compared to the previous year.

Average sales prices are forecast to continue to increase

• The average sales price for a newly constructed apartment in the Kansai region, as a whole (from January to November 2019) was ¥37,810,000 ($346,000USD), a year-on-year decrease of 1.6%, compared to ¥60,060,000 for the greater Tokyo area.
• The average price per sqm for a newly constructed apartment in the Kansai region, as a whole (from January to November 2019) was ¥673,000 ($6,169USD), representing seven consecutive years of increases, compared to ¥890,000 for the greater Tokyo area.
• Average sales prices in Kansai are forecast to continue to increase in 2020. In particular, if Osaka wins its bid for an Integrated Resort (IR) license, neighborhoods near the planned IR site will see a boost. Areas close to the site of the Osaka World Expo 2025 are also expected to see appreciation.
• Developers face intense competition with hotel and office building developers for construction workers and centrally located land. This has driven up construction costs and land prices.

Average sales prices

This is the breakdown by region and city of average sales prices for January to November 2019 in the Kansai region.

• Osaka City: Average sales price ¥35,110,000, down 1.2% YoY;  ¥785,000 per sqm, up 1.7% YoY
• Osaka prefecture, excluding Osaka City: ¥41,800,000, up 1.5% YoY;  ¥578,000 per sqm, up 1.0% YoY
• Kobe City: ¥34,470,000, down 10.6% YoY;  ¥629,000 per sqm, down 9.1% YoY
• Hyogo prefecture, excluding Kobe: ¥47,420,000, up 7.3% YoY;  ¥634,000 per sqm, up 8.0% YoY
• Kyoto City: ¥35,360,000, down 7.3% YoY;  ¥680,000 per sqm, up 5.1% YoY
• Kyoto prefecture excluding Kyoto City: ¥31,520,000, down 36.7% YoY;  ¥448,000 per sqm, down 30.4% YoY
• Nara prefecture: ¥37,660,000, up 1.7% YoY;  ¥468,000 per sqm, down 8.4% YoY
• Shiga prefecture: ¥38,190,000, down 6.5% YoY;  ¥516,000 per sqm, down 3.9% YoY
• Wakayama prefecture: ¥38,91,000, up 1.0% YoY;  ¥505,000 per sqm, down 1.9% YoY

Other highlights to take note of

• More and more developments are being built further away from stations, heating up competition for single-family homes in the suburbs.
• Middle-aged and elderly buyers are looking to buy apartments for the first time or to switch from their current homes, increasing demand for properties near terminal stations in the suburbs.
• There are currently 80 condominium developers operating in greater Tokyo (down from 87 in 2018).