Has the pandemic affected the supply and price of new and existing apartments?

Research provider Tokyo Kantei has released several reports looking at the state of Japan’s apartment market amidst the coronavirus pandemic, and it’s not all doom and gloom. Let’s take a look at some of the findings below.

In the second quarter of 2020, temporary showroom closures by developers saw the share of new construction dip to just 10% of the total supply of apartments released for sale. The idea of Japanese homebuyers only wanting new housing died out in the early 2000s. Over the past decade, brand-new condominiums have made up just 20% of the supply of apartments nationwide. The rest is existing housing put up for resale.

Year-on-year change in apartments supplied across Japan in second quarter of 2020:

New Construction Existing Apartments
Nationwide -50.2% +3.9%
Greater Tokyo -54.5% -4.3%
Greater Osaka -53.8% +10.4%
Greater Nagoya -46.5% +24.4%
Fukuoka Prefecture -19.3% +12.7%

Greater Tokyo

New and existing apartments have maintained high pricing throughout the pandemic, even increasing in some cases. One exception is older, 30+ year old buildings which have been on a gradual decline for the past two years. Meanwhile, new and near-new apartments are priced at the highest they have ever been, and the gap between the price of brand-new and apartments less than 5 years old has narrowed significantly. This may be due to the short supply of new construction, leading buyers to consider near-new properties that offer the same quality and newness. Back in 2005, new construction accounted for 47 ~ 48% of supply. This figure has dropped to the 15 ~ 20% range since 2016. 

The supply of new construction in the second quarter dropped 54.5% from last year, while the supply of existing apartments dropped just 4.3%.

The previous dip in the market was 2008 ~ 2009, following the global financial crisis. Existing housing, which is much more sensitive to supply and demand, especially in a downturn, saw average prices erode until they bottomed out in late 2009. The price of new construction, however, remained strong. Much of Japan’s apartments are supplied by major ‘zaibatsu’ developers who have access to cheap capital and the ability to limit supply to ride out a lull in the market.

Osaka and the Kinki Region

Supply of new construction in the second quarter fell 53.8% from last year, while existing apartment supply grew by 10.4%. In terms of pricing, the greater Osaka region has not seen any change since the start of the pandemic. Older, 30+ year old apartments made up 39.8% of the supply in the second quarter. The share in this building age group was in the single digits back in the early 2000s. It has doubled the past 7 years.

Source: Tokyo Kantei, July 30, 2020.

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