Osaka and Kansai Condominium Market Forecast 2019: Plus Sales Prices for 2018

The Real Estate Economic Institute (REEI) has released its 2019 forecast for supply trends in the new condominium market for the Kansai region, which consists of the prefectures of Nara, Wakayama, Kyoto, Osaka, Hyōgo and Shiga.

Kansai Region Forecast

For the full 2018 calendar year, supply of new condominiums is forecast to reach 19,900 units, a 1.7% YoY increase. This is higher than the initial forecast due to the effect of the final decision on the consumption tax hike in 2019.

In 2019, the REEI projects that supply will remain flat at about 20,000 newly constructed units, which would be a YoY increase of 0.5%.

If there is a surge in demand from buyers, developers may release as many as 22,000 in 2019.

Breakdown by major city:

• Osaka City: 9,800 units (YoY increase)
• Osaka prefecture, excluding Osaka City: 4,000 units (YoY decrease)
• Kobe City: 2,000 units (YoY decrease)
• Hyogo prefecture, excluding Kobe City: 1,800 units (YoY increase)
• Kyoto City: 1,200 units (YoY) increase

Large number of super high-rise units expected to be released in Osaka City

The REEI notes that we should expect to see a large number of super high-rise units to be released in Osaka City in 2019, as developers will be releasing a large number of units that were already completed in 2018. This is in addition to units that will be completed this year.

Increase in number of 1K-layout investment units

Due to competition from hotel construction, more and more 1K-layout investment units will be built on the periphery of Osaka City and not just in the city center. Supply of 1K investment units, in general, is forecast to rise.

The supply of newly constructed units in Osaka prefecture (outside Osaka City) and in Kobe City is forecast to decrease this year due to a decrease in actual unit size.

Increasing stock, construction starts strong

As of the end of November 2018, stock of newly constructed units stood at 2,648, a YoY increase of 12.7%. The REEI notes that stock is gradually showing signs of accumulation.

From January to October 2018, there were 22,040 construction starts of condominium units. a YoY increase of 20.5%.

Average sales prices

• The average sales price of a newly constructed condominium in Osaka City, from January to November 2018 was ¥34,110,000 ($315,000).

For average sales prices for other cities and prefectures in Kansai, please see the chart below.

Six straight years of increases in per-sqm sales price

From January to November 2018, the average sales price per sqm reached 659,000 JPY ($6,085), marking six consecutive years of increase.

Competition with hotel developers and construction costs continue to push up prices

Construction costs continue to be pushed up due to competition with hotel builders and increasing land prices in the Osaka city center.

Other trends to take note of

• Single-family homes in the suburbs are enjoying strong sales.
• At the same time, buyers are also attracted to large-scale condominium developments and buildings near stations that are perceived to provide good value.
• Properties in the New Town developments that were originally built in the 1960s and 1970s are now popular with middle-aged and elderly people.
• The number of developers (companies) supplying properties in the Kansai region increased YoY from 84 companies to 87 in the January to November 2018 period.