Japan Economic Update
Japan’s economy grew by 1% in 2016, posting 4 straight quarters of positive gains. This compares with a 1.2% GDP rise in 2015. The gain was primarily as a result of increased external demand for exports. Aided by a weakening yen, exports in 2016 increased by 2.6% thanks to recovering conditions in China and the United States. Despite efforts to re-start Japan’s domestic economy, overall consumer spending, which represents 60% of the overall economy, remained sluggish.
December Housing Starts Summary
December housing starts increased 3.9% to 78,406 units. For the first time in several months owner occupied single family housing led the gains with a 6.5% increase compared a 2.2% rise in rental units. The mansion condominium market gained 10.7%.
December total wooden starts improved 6.6% to 45,974 units. Post and beam housing increased 4.9% to 34,572 units. Pre-fab wooden starts fell 4.5% to 1,109 units and total pre-fab fell 4.1% to 12,179 units. Platform frame construction gained 13.9% to 10,293 units. Two by four starts broke down as follows: custom ordered single family units rose 11.9% to 2,716 units; rentals gained 16.8% to 6,422 units and built for sale speculative housing increased 1.6% to 1,122 units.
2016 Year End Japan Housing Starts: The Year in Review
In 2016 record low lending rates combined with a postponed consumption tax hike helped propel Japan’s housing market to its strongest showing since 2013. Annual housing starts closed off 2016 at 967,705 units. The results represent a 6.4% increase over 2015. Wooden housing was particularly strong, with an 8.3% increase to 546,336 units.
Although certain housing market analysts, citing demographic headwinds and anemic growth, had forecast doom and gloom ahead for Japan’s builders, 2016 gives us pause to think that it is rather the resiliency of wooden housing which is noteworthy. As a percentage of all housing, wooden construction held a 56.5% market share – the second highest ranking in over 30 years. And at the mid-550,000 range, wooden starts in 2016 attained their second highest level in the past 16 years.
By wooden housing types fortunes vary. Post & Beam clocked the strongest growth of 8.9% to finish at 408,632 units. However, average post & beam floor area advanced at a slower 6.2% rate indicating shrinking average floor area per P&B unit. Shrinking average floor area is also a trend evident in platform frame housing. While 2×4 starts increased 7.9% in 2016, growth in floor area trailed at 4.4%. What’s behind the shrinking footprint? Over the past year rental housing has consistently outperformed single family housing thus skewing the overall floor average – as the typical rental units typically represent about just over half the floor area of a single family owner occupied unit.
Platform frame construction achieved a new high in 2016, registering 123,713 units. This represents a 7.9% increase over year prior results. The composition of 2×4 starts reflects stronger relative growth in multi-family rentals – which advanced 11.7% to 77,114 units. Owner occupied single family homes edged up 1.1% to 32,305 units. Built for sale single family spec housing improved 3.0% to 13,795 units. As a percentage of overall starts, 2×4 saw a modest but steady market share increase to 12.8%.
Pre-fab housing trailed the pack with total results up 3.5% to 148,528 units. Within this group wooden pre-fab fell 2.5% to 13,991 units; reinforced steel & concrete fell 8.8% to 3,886 units; and steel frame increased 4.6% to 130,651 units. Most industry watchers expect that current market conditions will continue into 2017.
BC Wood Exports Summary
December 2016 year end British Columbia softwood lumber exports to Japan totaled 2,155,600m3: a decrease of 4.4% compared to year prior figures. By value 2016 exports totaled $725.7 million – a decrease of 4.4%. By species groups, SPF shipments dropped 0.7% to 1,564,202m3; Hem Fir shipments fell 14.1% to 267,444m3; Douglas Fir fell 10% to 210,886m3 and Yellow Cedar fell 17.6% to 67,944m3.