Kansai Area New Apartment Supply Falls to Lowest Level Since 1992

The Real Estate Economic Research Institute (REEI) said in a recent report that the number of newly built condominiums released for sale in the Kansai area fell 42.0% year-on-year to 494 units, the lowest number since August 1992. The huge drop was due to the impact of the coronavirus, as developers held back on new offerings amidst the state-of-emergency and temporarily shut down model rooms.

The Kansai results echoed results in the greater Tokyo region, which saw a year-on-year drop of 51.7%.

However, it is important to note that the April numbers are consistent with a longer-term year-on-year downward supply trend in the Osaka area. In April 2019, 852 newly constructed apartments were offered for sale, but this represented a 48.9% drop compared to April 2018. Since April last year, year-on-year supply has only shown positive year-on-year growth in three (June, July and December) of thirteen months.

As detailed in the January 2020 new condominium report for Osaka, developers are extremely cautious of depressing sales prices by releasing too many units for sale, both in the Tokyo and Kansai area. Especially in the Kansai region, which has seen high growth in the number of tourists from Asia (prior to the outbreak of the COVID-19 virus), builders are in tight competition with hotel developers for labor, materials, and land.

Below we go over the key takeaways from the REEI’s May report on April performance in the Kansai new condominium market.

Supply by region

The Kansai region consists of the city and prefecture of Osaka, and the prefectures of Hyogo (where Kobe is located), Kyoto, Nara, Shiga, and Wakayama. Below is the number of newly constructed condominium released for sale by region.

  • Osaka City: 249 units (-43.2% YoY)
  • Osaka prefecture (not including the city of Osaka): 80 units (-61.9% YoY)
  • Kobe City: 20 units (-75.3% YoY)
  • Hyogo prefecture (not including the city of Kobe): 22 units (-48.8% YoY)
  • Kyoto City: 5 units (-91.2% YoY)
  • Kyoto prefecture (not including the city of Kyoto): zero units
  • Nara prefecture: 108 units (+5,300% YoY)
  • Shiga prefecture: 9 units (-57.1% YoY)
  • Wakayama prefecture: 1 unit (v. zero units last year)

Contract Rate

In April, the contract rate in the Kansai region shot up to 77.9%, up 8.7 points from March and up 2.0 points year-on-year.

The contract rate is the number of units contracted for sale divided by the number of units offered for sale. A contract rate of at least 70% is considered a healthy buyers market. Below 70% represents a sellers market.

Contract rate by major city and prefecture:

  • Osaka City: 84.3%
  • Osaka prefecture: 55.0%
  • Kobe City: 70.0%
  • Hyogo prefecture: 50.0%
  • Kyoto City: 40.0%
  • Nara prefecture: 92.6%
  • Shiga prefecture: 33.3%
  • Wakayama prefecture: 100%

Average Sales Price of an Apartment in Kansai – By City & Prefecture

The average price of a newly constructed apartment sold in Kansai in April was ¥34,340,000 ($320,000) and the average price per sqm was ¥634,000. The average sales price represents two consecutive months of price increases, but the price per sqm was the third consecutive month of decline.

The average sales price in April was up 2.3% year-on-year but the average price per sqm was down 3.6% YoY.

Below is the average sales price by major city and prefecture. The number in parentheses is the price per sqm.

  • Osaka City: ¥24,500,000 (¥731,000 per-sqm)
    • The average sales price is not a typo but suggests that most units sold were smaller (1R or 1K)
    • For reference, the average price of a unit sold in the city of Osaka in January this year was ¥43,530,000 (¥701,000 per-sqm)
    • We will update this number if the REEI revises it.
  • Osaka Prefecture, excluding Osaka City: ¥44,530,000 (¥604,000 per-sqm)
  • Kobe City: ¥67,270,000 (¥855,000 per-sqm)
  • Hyogo Prefecture, excluding Kobe City: ¥39,930,000 (¥566,000 per-sqm)
  • Kyoto City: ¥63,350,000 (¥863,000 per-sqm)
  • Nara Prefecture: ¥40,067,000 (¥531,000 per-sqm)
  • Shiga Prefecture: ¥36,690,000 (¥498,000 per-sqm)
  • Wakayama Prefecture: ¥37,600,000 (¥495,000 per-sqm)

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Source: Real Estate Economic Institute, May 2020 (in Japanese)

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