New apartment prices in Kyoto drop as developers are forced out of city center

The supply of brand new apartments in Kyoto City in the first half of 2017 increased by 21.7% from the same period in 2016, while the average sale price saw a steep drop of 24.1% to 43,280,000 Yen. The reason for the decrease in the price was due to intense competition for hotel development sites in the city center which has forced apartment developers to shift their focus to the city’s outskirts where prices are cheaper.

In the first half of 2016, a number of luxury condominiums were offered for sale in Kyoto, pulling up average sale prices. However, with tourist numbers continuing to rise, sites that were originally slated for residential projects are now being converted to hotels which can provide better returns. This has also pushed up land prices.

A total of 751 brand new apartments were offered for sale in the city in the first half of this year, up 134 units from last year. The average sale price dropped by 18.0% to 649,000 Yen/sqm. The contract ratio increased by 7.4 points to 74.0%, which is still above the 70% line said to indicate healthy market conditions.

Residential developers have been looking to areas such as Fushimi-ku in the south and Ukyo-ku in the north-west where land prices are less expensive.

Future supply of new apartments in the city center is expected to shrink further as these market conditions continue.

Sources:
The Kyoto Shimbun, July 19, 2017.
The Real Estate Economic Institute, July 18, 2017.

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