Osaka’s Hot Housing Market: June 2022 Update

  |   By: Nancy Tonnu

The housing market in Osaka shows few signs of relief in terms of a cool down in prices.

The average sales price of a newly constructed apartment in the city of Osaka was ¥65,210,000 in May 2022. This was a year-on-year jump of 105.3% and also an increase of 61.0% compared to April.

The average sales price per square meter in May was also up 31.0% year-on-year and up 11.9% versus the previous month.

The very strong May sales figures confirm the steady upward price trend we have observed in the Kansai region since the start of the year.

Note the upward trend, since January, in average sales prices versus the previous month, except for the April dip. Source: Real Estate Economic Research Institute

As we noted in last month’s report, April was the first month in three months that the average sales price was down year-on-year. The May figures confirm that the April drop did not mark a pivot point in sales prices.

What is driving sales prices in Osaka?

Our working hypothesis is that the inventory of new condominiums in Kansai and more specifically, in the city of Osaka, is still below the level needed to meet buyer demand this year. Coupled with demand-side pressure, low supply will likely keep prices on an upward trend. Macroeconomic factors, specifically Japan’s ultra-low interest rate environment and the weak yen are also important in propping up demand.

Low supply

When the pandemic started shutting down the economy in March and April 2020, condominium developers around Japan reacted by sharply pulling back on bringing new units to the market.

In May 2020, the supply of newly built apartments released for sale plunged over 84% year-on-year, to the lowest level since 1991.

For 2020 as whole, the supply of new condominiums for the Kansai region came to about 13,900 units, or a decrease of 23.0% compared to 2019.

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.

Supply was finally able to recover in 2021. Last year, developers in Kansai released 18,951 units for sale, a 24.7% year-on-year increase. This meant that new supply slightly surpassed the number (18,042) released in 2019, prior to the start of the pandemic.

However, looking at the longer-term supply trend, supply in the Kansai region is still below the annual average level for 2012 to 2021.

The supply of newly built condominiums for Osaka, specifically, is still below the year-to-date supply in 2021.

Source: Real Estate Economic Research Institute

High demand

Japan has seen commodity inflation this year due to the supply chain situation and the war in Ukraine, which have pushed up the price of energy and food. However, because the Bank of Japan (BOJ) has committed itself to 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 this is the pandemic-led change in attitudes and policies encouraging people to work from home.

The trend in the average contract rate for new condominiums sold in Osaka also suggests that the city is in the midst of a strong sellers’ market.

Source: Real Estate Economic Research Institute

The contact rate is the number of units contracted for sale divided by the number of units offered for sale. A contract rate above 70% indicate a sellers’ market, where demand exceeds supply.

In every month this year, except April, the contract rate for the city of Osaka has exceeded 70%.

Osaka as a tourist destination

It’s also important to note Osaka’s attractions as one of Japan’s top tourist destinations, especially for inbound travelers from Asia.

In 2019, land prices in Japan rose 0.4% year-on-year, the second consecutive year of positive growth. This was due to the Olympic building boom and investment in anticipation of the Tokyo 2020 Olympics. Appreciation in commercial land prices was concentrated in tourist-friendly areas like Hokkaido, Osaka and Okinawa. However, land prices plummeted in the fourth quarter of 2020 as the economic fallout from the pandemic spread. Nationwide land prices did not start recovering until the fourth quarter of 2021.

Recovery in land prices is expected to continue as Japan starts to re-open its borders to tourists.

The rise in commercial land prices has a knock-on effect in the residential segment because condominium developers have to compete with hotel developers for labor and material supply. Homebuyers are also more attracted to areas with nearby conveniences.

Osaka, in particular, will likely benefit from the return of inbound tourists from Asia and Osaka Expo 2025.

A key segment in the residential market is people who buy small city-center units for investment purposes. Investors in 1K and 1R (studio-sized) apartments are very active in Osaka, where yield is higher than for comparable units in Tokyo.

Macroeconomic factors

The BOJ’s policy is also at odds with that of other major central banks around the world and has been responsible for the yen falling to about the ¥135 mark, after starting 2022 at around ¥115 to the US dollar, a depreciation of about 16% so far this year. The weak yen has made Japanese real estate even more attractive to foreign buyers.

May’s demand and supply data support the hypothesis that developers continue to have an incentive to release new supply slowly, so as to not cause any sudden drops in sales prices. On the demand side, macroeconomic factors and government policy, including buyer incentives, are also central to buoying buyer sentiment.

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

Here is the breakdown of average sales prices by area for May 2022 compared to April 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 May 2022 compared to April 2022 and year-on-year.


Real Estate Economic Research Institute (REEI), Kansai New Condominium Market Trends Report for February 2022, March 2022, April 2022, May 2022 and June 2022 (PDF in Japanese)

Lead image: Dotonbori, Osaka, istock 1271290719

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