Japan Economy, Housing Starts & Lumber Shipments
Japan Economic Update: Tourism Continues to Surge
Despite a stronger yen in the first 9 months of 2016, international tourism to Japan continues to surge at double digit rates. Total annual visitors to Japan grew from 6.2 million in 2011 to 13.4 million in 2014 and has reached 20 million year to date in September of 2016. Tourism industry analysts predict a total of 24 million visitors by the end of 2016 and the Japanese government has set an ambitious forecast of 40 million annual visitors the year Japan hosts the Tokyo 2020 Olympics.
The recent surge is as a result of a number of game changer factors including the emerging middle class of China and Southeast Asia along with a relaxation in tourism visas by Japanese customs and successful “Cool Japan” tourism promotion initiatives in Asian markets. This combined with Japan‘s reputation as a safe, clean and friendly destination has the stars aligned for the hospitality and tourism sector. With existing hotel infrastructure already ageing and stretched, this segment represents a significant growth opportunity going forward for wood frame construction.
Japan Housing Starts Summary: Posting Solid Growth in the First 9 Months of 2016
At the start of 2016 the Abe government planned to raise the consumption tax a further 2% to 10% in April of 2017. However, fearing a near term increase might jeopardize Japan’s economic recovery, by mid-summer the LDP government postponed the increase to 10% until October 2019. Deferral helped reduce near term housing market volatility. At the same time, the Bank of Japan’s negative interest rates and monetary stimulus have resulted in record low mortgage rates thus supporting housing growth. As a result, the housing market posted stronger than expected gains so far in the first nine months of 2016. Between January and September, starts advanced 5.5% to 716,541 posting the strongest performance since 2008. Platform frame starts increased 6.7% and are on track to finish 2016 at a record high – surpassing the high watermark of 120,111 (2013).
August Housing Starts Summary
August total housing starts increased 2.5% to 82,242 units. Single family owner occupied housing registered growth of 4.3% for the 7th consecutive monthly gain. Rental housing posted strong growth of 9.9%. However, the mansion condominium market declined 12.7%.
Total wooden housing increased by 7.9% to 48,717 units. Post and beam starts improved 7.6% to 36,470 units. Wooden pre-fab starts were down 12.3% to 1,143 units. Two by four starts posted an 11.7% gain to 11,104 units. By housing type 2×4 custom ordered single family homes increased 8.1% to 3,110 units; rentals surged 16.0% to 6,877 units and built for sale 2×4 spec housing declined 4.4% to 1,086 units.
September Housing Starts Summary
In September housing starts jumped 10.0% to finish at 85,622 units. As with prior months, rental housing led the gains with a 12.6% increase compared to a modest 1.4% increase in single family owner occupied housing. The mansion condominium posted a 23% increase after registering a significant fall the month prior. (Non-Wood condominium starts are notoriously volatile that way) In terms of overall starts, the double digit increases were heavily weighted to the Kanto (Greater Tokyo Region), compared to more modest growth of between 1.0 to 6.5% in the rest of the country.
Total wooden housing gained 10.1% to 49,733 units. Of these, post and beam starts rose 10.0% to 36,707 units. Pre-fab wood starts were up 6.6% to 1,279 units. Total pre-fab starts increased 13.9% to 13,680 units. Two by four starts increased 10.9% to 11,747 units. Two by four starts broke down as follows: custom ordered single family units declined 3.0% to 2,811 units; rentals surged 16.9% to 7,702 units and built for sale speculative housing increased 14% to 1,227 units.
BC Wood Exports Summary
As of the end of September British Columbia year to date softwood lumber exports to Japan totaled 1,586,815m3: a decrease of 4.5% compared to year prior figures. By value year to date exports totaled $530.1 million – a decrease of 5.4%. By species groups, SPF shipments remained comparatively stable with a 0.1% decline to 1,150,578m3. In contrast between January and September Hemlock decreased 12.1% to 199,715m3, Douglas Fir fell 14.1% to 156,586m3 and Yellow Cedar fell 22.8% to 48,728m3.