New Condominium Supply Soars in Kansai Region, Reversing 5 Months of Flat Growth

The number of newly built condominiums released for sale in the Kansai region jumped double digits year-on-year in August, reversing five months of flat growth. Developers in western Japan released 1,617 units for sale last month, an increase of 20.6% year-on-year. It was also the first year-on-year monthly increase since the coronavirus started impacting business activity in March. Supply was also up 75.6% compared to July.

Of note is that sales of compact urban-style apartments in Osaka City were responsible for driving both sales numbers and the contract rate upward.

This is according to the Real Estate Economic Institute (REEI)’s latest monthly report on the state of the Kansai area new condominium market, which covers the city and prefecture of Osaka, and the prefectures of Hyogo (where Kobe is located), Kyoto, Nara, Shiga, and Wakayama.

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. The spike in August supply is a welcome reversal in the supply trend.

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

Supply by city and prefecture

  • Osaka City: 734 units (-7.3% YoY), comprising 45.5% of total supply in Kansai region
  • Osaka prefecture (not including the city of Osaka): 400 units (+44.4% YoY), 7.4% of total supply
  • Kobe City: 155 units (-78.2% YoY), 9.6% of total supply
  • Hyogo prefecture (not including the city of Kobe): 120 units (+76.5% YoY), 18.7% of total supply
  • Kyoto City: 166 units (+100.0% YoY), 10.3% of supply
  • Kyoto prefecture (not including the city of Kyoto): zero units
  • Nara prefecture: 37 units (+94.7% YoY), 2.3% of supply
  • Shiga prefecture: 3 units (+72.7% YoY), 0.2% of supply
  • Wakayama prefecture: 4 units (no units were released for sale in Wakayama in August 2019), 0.1% of supply

Contract rate jumps, indicating a turn to a buyers market

In August, the contract rate in the Kansai region jumped sharply to 78.2%, up 10.8 points compared to July, but down 6.7% 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: 90.9%
  • Osaka prefecture: 56.5%
  • Kobe City: 89.0%
  • Hyogo prefecture: 63.3%
  • Kyoto City: 83.1%
  • Nara prefecture: 48.6%
  • Shiga prefecture: 66.7%
  • Wakayama prefecture: 0%

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

The average price of a newly constructed apartment sold in Kansai in May was ¥34,920,000 ($331,000), a drop of 29.0% compared to the average sales price in July; but up 14.3% compared to August 2019 (¥30,540,000)

The average price per sqm was ¥694,000. The average sales price represents six consecutive months of price increases, and the price per sqm was the second consecutive month of increase.

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

  • Osaka City: ¥28,790,000 (¥801,000 per-sqm)
  • Osaka Prefecture, excluding Osaka City: ¥43,080,000 (¥590,000 per-sqm)
  • Kobe City: ¥25,130,000 (¥757,000 per-sqm)
  • Hyogo Prefecture, excluding Kobe City: ¥52,640,000 (¥679,000 per-sqm)
  • Kyoto City: ¥36,030,000 (¥736,000 per-sqm)
  • Nara Prefecture: ¥46,240,000 (¥592,000 per-sqm)
  • Shiga Prefecture: ¥36,670,000 (¥534,000 per-sqm)
  • Wakayama Prefecture: ¥39,100,000 (¥532,000 per-sqm)

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

Lead photo: Osaka City night panorama via iStock