Asian Cities - 2H 2023

S P OT L I G H T
Savills Research

Osaka Residential Sales

Osaka Residential Sales

Condominium prices in Osakacontinue to rise
GRAPH 1: Residential Land Prices in Osaka City, 2011 to 2023
Central 6 Wards

Osaka City

600,000
550,000

JPY PER SQ M

500,000
450,000
400,000
350,000
300,000
250,000
200,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source Ministry of Land, Infrastructure, Transport and Tourism, Savills Research & Consultancy

GRAPH 2: Supply and Average Price of New Condominium in Osaka City, 2011 to 2022
SupplyPrice per sq m (RHS)1,000

9,000

900

8,000

800

7,000

700

6,000

600

5,000

500

4,000400

3,000300

2,000

200

1,000100

THOUSAND YEN

NUMBER OF UNITS

10,000002011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source REEI, Savills Research & Consultancy

GRAPH 3: Taxable Income vs Condominium Price Index, 2011 to 2022
Taxable income per taxpayer in Osaka City
New condominium priceSecond-hand condominium price200

INDEX (2012 = 100)

180
160
140
120
100
80
2011

2012

2013

2014

2015

2016

2017

2018

2019202020212022

Source National Tax Agency, REEI, REINS, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

2INTRODUCTION
Condominiums in Osaka City have seen
prices increase, especially in recent years, on
the back of rising construction costs and land
prices, hitting a new high of JPY914,000 per
sq m in 2022. Despite these increments, thecontract rate1 for condominiums in Osaka
has remained comfortably above 70%, with
fundamental factors including a growing
population and low interest rates supporting
demand. Demand for housing in the city
is likely to increase further in the current
post-pandemic era, as higher levels of officeattendance should entice more people tolive closer to the main business districts ofOsaka. This trend can be observed especiallyin central wards in Osaka City, wherepopulation growth has been the strongest,and residential land prices have skyrocketed.
Condominium prices are projected toremain elevated, with prevailing economic
headwinds contributing to high construction
costs unlikely to dissipate in the near future, as
well as sound demand from a greater numberof high-earning dual-income households.
At the same time, lukewarm wage growthin Osaka City over the past decade suggeststhat price appreciation might slow down,
and developers will control supply to cater totarget demographics, thus keeping the for-salemarket in balance. Overall, the market should
see moderate, but sustainable growth.
DEMAND AND SUPPLY
One reason for the increment of for-salecondominium prices is the low supply of
new units. According to the Real Estate
Economic Institute (REEI), the number ofcondominium units constructed in 2022
was about 25% lower than the peak supply
observed in 2017 (Graph 2). Construction
volumes in Osaka City have thus seen a cleardecline since the pandemic. However, evenin the post-pandemic environment, supply
is unlikely to see significant increments.
Construction costs are more than 20% higher
compared to pre-pandemic times, having
climbed sharply due to inflation and labour
shortages. Furthermore, land prices arealso on the rise, especially in central areas,
and land suitable for developing for-saleproperties is more difficult to acquire. In
addition, in 2024, a new bottleneck will
be added to the supply chain with new
regulations on the amount of overtime
allowed for construction workers, which
will likely slow down new supply being
added to the market. Given the prevailing
1 The contract rate is generally defined as the percentage ofoffered units sold within the first month. This measure isclosely monitored as it gauges the strength of demand. Given
the significant pre-sales effort before the beginning of actualsales, 70% is typically considered to be an inflection point.

Osaka Residential Sales

circumstances, new supply will likely berather subdued going forward, and cost-pushinflation will push developers to raise selling
prices.
At the same time, a plethora of demandside factors have also contributed to priceincrements. Actual domestic demandhas been high, with low interest rates
and government-sponsored housing loan
schemes effectively lowering the barrier toentry for home buying. A growing numberof high-earning dual-income households
and greater demand for more space toaccommodate remote work have also
likely fuelled housing demand. The weak
yen also appears to have attracted someinflows of foreign capital, from wealthybuyers looking for overseas homes, andfrom those looking for avenues to transfer

Strong demand, high construction
and land costs have contributed toelevated prices of both new andsecond-hand condominiums in
Osaka. Wage growth has been slow
in comparison, and many people will
likely be priced out and required tostay in the rental residential market.

and store wealth, with Japan as a top
destination due to the country’s politicalstability and strong ownership laws within
the Asia Pacific region. Osaka City is a
popular inbound tourist destination, andits relative affordability compared to Tokyo
should make it a favourable choice for suchclientele. Overall, prices are expected toremain high, albeit controlled, as a result ofthese demand and supply factors.

GRAPH 4: Greater Osaka and Osaka City Contract Rate, 2011 to 2022
Greater Osaka

Osaka City

85%80%75%70%65%60%
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Source REEI, Savills Research & Consultancy

MAP 1: Osaka City Population Compound Annual Growth Rate, November 2019 vsNovember 2023
CAGR
-1.36%

3.13%

Higashiyodogawa
Yodogawa

Nishiyodogawa
Fukushima
Konohana

Asahi

Kita

Miyakojima
JotoTsurumi

Chuo

Nishi

Higashinari

Naniwa Tennoji

MinatoIkunoTaisho

Nishinari
Abeno

Suminoe

HiranoHigashisumiyoshi
Sumiyoshi

Source Osaka City Government, Savills Research & Consultancy

3PRICED OUT OF THE FOR-SALE
MARKET
Indeed, condominium prices in Osaka City
have been on a steadily increasing trend
over the past decade. According to REEI,in 2022, average new condominiums werepriced at JPY46.5 million per unit, havinggrown more than 40% since 2012. Withhigher development costs and contract rates
at comfortable levels, major developers
with healthy balance sheets have few
incentives to lower prices, meaning thatprices are expected to stay high going
forward. Moreover, those turning to thesecond-hand condominium market will notnecessarily find better luck, as this market
has seen even more drastic changes, withthe average transacted unit priced at JPY33.8
million in 2022 according to the Real Estate
Information Network Systems (REINS),having increased by almost 90% since 2012.
In contrast, wages in Osaka City havenot kept up with these rising prices at all.
Looking at Graph 3, the average income pertaxpayer in Osaka has grown by less than
20% since 2012, a far cry from the 40% and90% of new and second-hand condominiums,respectively. While some wage hikes havebeen reported as a result of the 2023 “Shunto”
spring negotiations, considerable increments
are significantly more likely to be fromOsaka Residential Sales

GRAPH 5: Housing Mortgage Rates, September 2020 to November 2023

2.5%

Variable (Internet Banks)
Variable (Local Banks)
35-year Fixed (Flat 35)

Variable (Mega Banks)
10-year Fixed (Mega Banks)

2.0%

1.5%

1.0%

0.5%

0%
0.0%

Source Mogecheck, Savills Research & Consultancy

larger corporations, and not applicable to themajority of people in Osaka.
As a result, the disproportionate
increments in condominium prices will
likely make them unaffordable for a growing
number of potential homebuyers, further
exacerbated by mortgage rates that could
increase when the Bank of Japan further
normalises its monetary policy. Looking
at Graph 5, this is already apparent in thecase of fixed-rates. For-sale condominiums
have become out of reach for many people
in Osaka, many of whom will likely have toresort to rental properties.

OUTLOOK
Condominium prices in Osaka City haverisen to significant levels in recent years,
particularly in the case of the second-handmarket. Despite these high prices, contract
rates were still comfortably above 70% evenduring the pandemic, showing that demand
was sound. Furthermore, controlled andsubdued supply based on high construction
costs and rising land prices is likely tolead to prices remaining elevated. This, inconjunction with slower wage growth in thecity, means that buying a home has gradually
become out of reach for many people. As aresult, a growing number of people will likelybe required to resort to renting units insteadof buying, especially for those who wish tolive in central wards.
Barring a slight dip during the pandemic,
Osaka City’s population has steadily
increased over the past decade, and its
population as of November 2023 has
comfortably surpassed its pre-pandemic
peak. As the economic hub of the Kansai
region, Osaka is likely to continue
attracting migrants both domestically andinternationally, and its strong population
fundamentals should serve as a solid basefor residential demand. Over the next
several years, Osaka City will see major
developments that are likely to transformthe city, most notably with the upcoming
Integrated Resort, which should be a gamechanger for the city, further propelling its
tourism industry and attracting greaterlevels of migration, as discussed in our
Osaka Residential Markets report.
For-sale condominium prices are likely toremain high on the back of sound demand
and their elevated cost structures. At thesame time, the lukewarm wage growth in thecity should set a limit on how high average
prices can climb to, and developers areexpected to control supply in accordancewith projections in their target markets. Assuch, the for-sale market is expected to seesustainable growth. Nevertheless, prices
will still be unaffordable for many residents,
which will serve as a tailwind for the rental
residential market.

For more information about this report, please contact us
Savills Japan

Savills Research

Christian Mancini
CEO, Asia Pacific(Ex. Greater China)+81 3 4330 3611
cmancini@savills.co.jp

Tetsuya Kaneko
Managing Director, Head of
Research & Consultancy, Japan+81 3 4330 3103
tkaneko@savills.co.jp

Simon Smith
Regional Head of Research& Consultancy, Asia Pacific+852 2842 4573
ssmith@savills.asia

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