The average sales price of a newly constructed apartment in the city of Osaka was ¥40,500,000 ($319,000 USD) in April 2022. This was a big year-on-year drop of 34.4% and also a drop of 28.3% versus March.
The average sales price per square meter was also down 2.9% year-on-year and down versus March by 5.5%.
For the Kansai region as a whole, the April average sales price came in at ¥39,830,000 ($314,000 USD), down 25.6% year-on-year, pulled down by big sales price drops in the cities of Osaka and Kobe and the prefectures of Kyoto and Nara.
The average sales price per square meter for Kansai was also down 4.1% % year-on-year in March to ¥732,000 ($5,758 USD) per square meter.
Data for the Kansai region covers Osaka prefecture, the city of Osaka, Hyogo prefecture, the city of Kobe, Kyoto prefecture, the city of Kyoto, and Nara, Shiga, and Wakayama prefectures.
A break in the price trend
April was the first month in three months that the average sales price was down year-on-year and the first month in six months that average price per square meter was down year-on-year.
Does it mark a turning point?
Does this mark a pivot point where average sales prices might start heading lower this year? Our hypothesis is that the inventory of new condominiums is still below the level needed to meet buyer demand this year, despite the data points in April. The April contract rate was 59.8%, with a level above 70% indicating a sellers’ market. The contact rate is the number of units contracted for sale divided by the number of units offered for sale. So, the sub-70% contract rate suggests that sellers had difficulty closing sales in in April.
It’s also important to note that if we only look at the contract rate for “family-type” condominiums being purchased as owner-occupied units, the contract rate for April rises to 70.3%. The reason that the overall contract rate fell below the 70% mark is that investors bought relatively fewer compact units (with smaller floor areas) than were released for sale.
If we look at the monthly contract rate for the previous four months (December 2021 to March 2022), we see that buyer demand has been very strong, with an average contract rate of 75.8%, indicating a strong seller’s market. This is a situation where property sells relatively quickly due to low inventory and strong buyer demand.
Japan has seen general price inflation this year due to the supply chain situation and the war in Ukraine, but because the Bank of Japan has committed itself holding down interest rates, mortgage rates in Japan remain at historic lows. The underlying financial incentives for people to consider buying remain strong, added to the pandemic-led change in attitudes and policies encouraging people to work from home.
In April, developers in Kansai released 1,148 newly constructed units for sale, the first time in three months that the number of units increased year-on-year. However, this number (1,148 units) was below the monthly average for the previous twelve months, of 1,513 units.
The annual supply of newly constructed units in FY2021 (18,160 units) climbed above the number released in FY2019 (17,452 units), meaning that supply has recovered to pre-pandemic levels, but looking at the longer term trend, we see that the the 18,000 unit level is below the average of the last ten years (2012 to 2021) of 20,353. Even if we exclude 2018 from the average (because it was a data outlier related to the anticipated Tokyo 2020 Olympics,) the average of 2012 to 2021 (excluding 2018) was still 19,525 units.
The Real Estate Economic Research Institute (REEI) forecasts that in May, about 1,100 newly constructed units will be released for sale in Kansai. If this holds, it would be below the 1,321 units offered for sale in May 2021 and lower than every year in the last four years for May, excluding May 2020 (214 units) when the pandemic caused developers to almost completely stop releasing new inventory: May 2019 (1,388 units), May 2018 (1,480 units) .
The data on the long-term supply situation and forecast supply suggests that it is more likely we will see developers continue to release new supply slowly into the market this year. At the same time, the factors pushing up demand seem more likely to remain strong (low mortgage rate environment, government incentives to purchase, and the easing of the border situation, which has the knock-on effect of raising land prices).
Average Sales Price of an Apartment in Kansai – By City & Prefecture
Here is the breakdown of average sales prices by area for April 2022 compared to March 2022 and year-on-year.
Average Sales Price of an Apartment in Kansai – By City & Prefecture
This is the breakdown of average sales prices per square meter by city and prefecture for April 2022 compared to March 2022 and year-on-year.
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Need to Know
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Lead photo: Osaka suburb with view of Umeda sky building in distance, via iStock 536613571