Axross Asset Advisors Blog

The Appeal of Real Estate Investment in Osaka and Recommended Areas for Buying Apartments

Osaka Real Estate Investment

Currently, investors from around the world are paying attention to Osaka's real estate market. Many of you might already be considering purchasing an apartment or a house in Osaka. In this article, we will not only explain the unique appeal of real estate investment in Osaka but also why international interest in this market is growing.

For those who do not reside in Japan, it may be difficult to take the plunge into real estate investment due to a lack of knowledge about Osaka's geography and market. However, this time we will introduce key points for purchasing high-yield properties and the areas in Osaka that are suitable for buying investment apartments. Please take a look.

The Appeal of Real Estate Investment in Osaka

Osaka castle

Osaka is one of the most attractive cities in the world. When starting real estate investment in Osaka, let's understand the current status and strengths of the Osaka area.

1. Increasing Young Population

According to the population dynamics survey released by the Ministry of Internal Affairs and Communications (as of January 1, 2023), the overall population of Osaka Prefecture decreased slightly by 0.19%, but the social increase in Osaka City alone was 25,531 people, the highest among municipalities nationwide.

In particular, Tennoji Ward, Kita Ward, and Chuo Ward in Osaka City have been in the top 50 in Japan's population change rankings for the past five consecutive years. These areas have a high number of young single residents, leading to a high demand for studio apartments.
Source: Nikkei BP | Population Growth Rate Rankings 2018-23

2. Land Prices are Stable

Osaka is Japan's second-largest city after Tokyo and has historically developed as a commercial center. It continues to be an important hub for the economy, culture, and tourism. While Kanagawa Prefecture, adjacent to Tokyo, has a slightly larger population than Osaka Prefecture, the economic scale of Osaka is greater, with a total production of 41,188,364 million yen compared to Kanagawa's 35,205,391 million yen.

Moreover, several projects are underway in Osaka to further promote regional economic growth, which are expected to contribute to the stable increase in land prices. In fact, recent data shows that the average real estate prices in Osaka have increased by 1.6% for residential areas and 6.0% for commercial areas compared to the previous year. Additionally, Osaka's land prices are relatively affordable compared to Tokyo, making it easier to purchase properties such as apartments and houses. These factors suggest that Osaka's land prices are expected to remain stable in the future.
Source: Ministry of Land, Infrastructure, Transport and Tourism | Overview of Land Prices 2024

3. Popular Among Foreigners

In the 2023 edition of "The World's Most Livable Cities" by the renowned British economic magazine "The Economist," Osaka was the only Japanese city to rank in the top 10. Additionally, in the 2018 Survey on Consumption Trends of Foreign Visitors to Japan, Osaka recorded the highest visit rate in Japan at 41.8%. This demonstrates that Osaka has a unique appeal to people from abroad among Japanese cities, and it is expected that the attention from foreign investors in the real estate market will continue to increase.

Four Reasons Why Osaka's Apartments Are Gaining International Attention

Osaka Property

Osaka's apartments are also gaining high attention among overseas investors. Here, we will explain in order the upcoming trends in the Osaka area and the three reasons that are expected to influence the rise in real estate prices.

1. Osaka Expo 2025

The World Expo (Osaka-Kansai Expo) is scheduled to be held in 2025. Around the venue at Yumeshima, new infrastructure such as a new station for Osaka Metro and highways is being developed.
Additionally, there is a boom in real estate development, including offices and hotels in central Osaka. According to the Ministry of Economy, Trade, and Industry, the economic ripple effect of the Osaka Expo is estimated to be about 2.9 trillion yen. There is also a rush of apartment construction, and with an increase in new residents, real estate prices are expected to rise.
Source: Nihon Keizai Shimbun|Economic effect of the Expo estimated at 2.9 trillion yen, 400 billion yen higher than previous estimates, according to the Ministry of Economy, Trade, and Industry

2. Extension of the Naniwasuji Line and Opening of the Linear Chuo Shinkansen

The Naniwasuji Line is a new railway line scheduled to open in 2031, connecting Osaka Station, JR Namba Station, and Shin-Imamiya Station on the Nankai Main Line.
Currently, it takes about an hour to travel from Kansai International Airport to Osaka/Umeda, but with the opening of the Naniwasuji Line, this travel time is expected to be reduced to about 40 minutes. Additionally, access to Shin-Osaka Station, where the Shinkansen operates, will be improved. This development is expected to invigorate the movement of both tourists and local residents and increase real estate demand along the line due to improved convenience.

Furthermore, around 2045, the Linear Chuo Shinkansen is expected to open, connecting Tokyo and Osaka in as little as 67 minutes. The development of the transportation network is anticipated to increase the demand for major companies to expand or relocate to the Kansai region, further boosting the demand for rental apartments and other properties.

3. Construction of Integrated Resort (IR)

Osaka plans to build an Integrated Resort (IR) that includes a casino on the site of the 2025 Osaka Expo, aiming for an opening in the fall of 2030. This IR will be divided into four zones, including an international conference center, hotels, a shopping mall, and a cinema. It has high expectations from across Japan, with the economic impact of the completed resort estimated at about 1.2 trillion yen.
Furthermore, it is predicted that after opening, the resort will generate about 57 billion yen in annual tax revenue and create approximately 90,000 jobs, leading to an increase in rental demand.

4. Financial and Asset Management Special Zone

Osaka is currently aiming to be designated as a Financial and Asset Management Special Zone, which the national government seeks to establish. This special zone will implement regulatory reforms in line with global standards, attracting investment funds from overseas and drawing in domestic and international asset management companies and fintech firms, with the goal of creating the international financial city of "Osaka."
Moreover, it is proposed that overseas investors who establish a base in this special zone and invest about 120 million yen in growth industries within Osaka Prefecture within three years will be granted permanent residency.
Source: "Financial and Asset Management Special Zone" Proposal - Osaka Prefecture

In this way, Osaka is undergoing various projects to revitalize the city, such as redevelopment plans and railway line extensions. The city continues to attract people and investments from both domestic and international sources. As a result, population growth and rising land prices, which are important for real estate investment, are expected.

Comparison of Osaka's Real Estate Price Trends with Other Major Cities

Whether you are considering purchasing investment properties in Osaka or looking to buy a condo or house for personal residence, understanding the historical price trends can be helpful in making your decision. Let's compare the real estate price trends in Osaka with those in other major cities in Japan.

First, let's look at the data on the rate of increase in the price per square meter of new and used apartments.

Rate of Increase in Price per Square Meter of New Apartments

2013 2022 Increase Rate
Osaka City 496,000 yen 818,000 yen 164.9%
Tokyo (23 wards) 865,000 yen 1,288,000 yen 148.9%
Fukuoka City 417,000 yen 740,000 yen 177.6%

Rate of Increase in Price per Square Meter of Used Apartments

Rate of Increase in Price per Square Meter of Used Apartments

2013 2022 Increase Rate
Osaka City 265,000 yen 435,000 yen 164.1%
Tokyo (23 wards) 524,000 yen 900,000 yen 171.7%
Fukuoka City 166,000 yen 225,000 yen 135.5%

Real Estate Economic Research Institute "Trends in the Condominium Market"
TOKYO KANTEI - Trends in Condominium Supply in Fukuoka City and Kitakyushu City

The real estate market in Osaka has shown remarkable growth over the past decade. From 2013 to 2022, the price per square meter of new apartments increased by about 164.9%, and the price per square meter of used apartments increased by about 164.1%. This growth rate is very attractive compared to Tokyo and Fukuoka.

In Tokyo, the price per square meter of new apartments increased by about 148.9% during the same period, and the price per square meter of used apartments increased by about 171.7%. On the other hand, in Fukuoka, the price per square meter of new apartments increased by about 177.6%, and the price per square meter of used apartments increased by about 135.5%. As this data shows, the real estate market in Osaka has shown balanced growth in both new and used apartments, indicating its high appeal as an investment destination.

Particularly noteworthy is the increase rate of the price per square meter of used apartments in Osaka. Although slightly lower than Tokyo, it has shown significant growth compared to Fukuoka. This indicates that Osaka is a stable market where you can expect consistent returns on real estate investments. Both new and used apartments have shown high growth, offering a wide range of property choices and diverse investment strategies.

Next, let's look at the average price trends for newly built and used single-family homes.

Average Price Trends for Single-Family Homes

May 2022 April 2024 Increase Rate
Osaka City: New 46.97 million yen 51.33 million yen 109.3%
Osaka City: Used 37.26 million yen 54.20 million yen 145.5%
Tokyo 23 Wards: New 82.97 million yen 88.58 million yen 106.8%
Tokyo 23 Wards: Used 97.40 million yen 111.69 million yen 114.7%

Tokyo Kantei|Press Release / Average Price for New Single-Family Homes
Tokyo Kantei|Press Release / Average Price for Used Single-Family Homes

The prices of single-family homes in Osaka have also shown an upward trend for both new and used homes, although the rate of increase is more moderate compared to apartments. Particularly for used homes, the increase rate was significantly higher than that in Tokyo.

Top 5 Recommended Areas for Buying Apartments in Osaka

Location is the most crucial factor in real estate investment. Osaka consists of 24 administrative wards, and here are the top 5 recommended areas.

1. Kita Ward

The Umeda area in Kita Ward is Osaka's commercial hub, with Osaka Station and Umeda Station being among Japan's busiest terminals. The area is home to large commercial facilities like department stores, office buildings, Osaka City Hall, and Osaka High Court.
The ongoing large-scale redevelopment in Umeda is focused on the northwest of Osaka Station, where the former Umeda Freight Station was located. This prime location, often referred to as "Osaka's last prime land," is attracting significant attention. The redevelopment is expected to bring a large influx of people, increasing the demand for rental apartments.

2. Chuo Ward

Chuo Ward includes popular tourist spots such as Dotonbori, Shinsaibashi, and Osaka Castle. It is one of Osaka's premier downtown areas, filled with shopping streets, department stores, restaurants, and apparel shops, rivaling Umeda in popularity. Besides being a bustling commercial area, it also houses the Osaka Prefectural Government Office and the Osaka Exchange, making it a central hub for administration, economy, and finance. Many companies headquartered in Osaka are located in Chuo Ward. The recent increase in elementary school children has led to a surge in the construction of large tower apartments, resulting in a notable rise in the number of households in recent years.

3. Nishi Ward

Nishi Ward has a younger population compared to other wards, with the lowest proportion of elderly residents (65 and over) at 15.7%. The eastern side is trendy, with stylish cafes and the America-mura area, which is popular among young people. The western side, on the other hand, has a quiet residential neighborhood with a charming, old-town atmosphere.

Nishi Ward also offers excellent accessibility, with several Osaka Metro lines such as the Yotsubashi Line, Sennichimae Line, Chuo Line, and Nagahori Tsurumi-ryokuchi Line running through the ward. With a high number of single-person households, purchasing a apartment for singles is a good choice.

4. Tennoji Ward

Tennoji Ward is located almost in the center of Osaka City and forms part of the city center. The ward houses Tennoji Station, a major terminal station following Umeda and Namba. It is highly convenient for transportation, served by various JR lines, Osaka Metro Midosuji Line, and Tanimachi Line, and is widely used by commuters from Nara and Wakayama prefectures.

The ward has numerous temples and shrines, as well as cultural attractions such as museums and zoos, making it a well-rounded tourist destination. Together with the neighboring Abeno Ward, it forms a large commercial area. The construction of Japan's tallest building, Abeno Harukas, in 2014 has also attracted a younger population to the area.

5. Yodogawa Ward

Yodogawa Ward is a highly convenient and popular area, home to Shin-Osaka Station, one of Japan's largest transportation hubs. The area around Shin-Osaka Station is filled with office buildings, and many headquarters and branches of major global companies are located here.

Furthermore, Yodogawa Ward is poised for an increase in real estate value with the opening of the Linear Chuo Shinkansen and extension of the Hokuriku Shinkansen. It's recommended to invest in rental apartments sooner rather than later, before redevelopment plans are fully implemented.

Summary of the Attractiveness of Real Estate Investment in Osaka

As mentioned earlier, Osaka is seeing advancements in urban redevelopment for the Expo, the opening of the Naniwa Line, and plans for the Linear Chuo Shinkansen. These developments are expected to lead to rising land prices due to population growth and increased demand for rentals, offering a stable long-term investment environment.

When considering real estate investment, Osaka's market trends and growth potential cannot be overlooked. Based on the performance of the past decade and future development plans, Osaka can be considered an extremely attractive investment destination.

May 23, 2024