Japan Housing Starts 2017 Year End Review
Considering that only a few years ago Japanese economists had previously expected housing starts to fall to the 800,000 mark by 2017, last year’s results of 964,041 units were indicative of continued building sector strength. The 2017 results showed a modest 0.4% year over year decline, mainly attributable to slowing activity in the second half of the year. Behind these numbers, certain trends are evident.
Regional disparities: Regional growth disparities are also becoming a more pronounced theme in Japan’s housing market. While Japan is currently posting its longest record of uninterrupted growth since the 1980s “Bubble Era”, population and economic decline is accelerating in many rural prefectures. In terms of population only Great Tokyo and Nagoya are currently growing. This translates into relative strength in housing. Take December 2017 as an example: Tokyo gained 13.2% whereas Toyama and Oita prefectures fell 25.8% and 31% respectively.
The Shrinking Wooden Housing Market is a Myth: As a percentage of all starts, wooden housing matched the 2010 all time market share high of 56.6%. Wooden housing came in at 545,366 units – down 0.2% or less than 1,000 units from the year prior. Despite the two decade decline in total housing starts, thanks to market share growth in wood Japan’s current wooden housing starts are posting overall numbers similar to when overall starts were ranging between 1.1 and 1.2 million starts from the late 1990s and throughout the 2000s. At 545,000 units, 2017 wooden housing starts were virtually the same level as they were in 1998.
Intensifying Competition: The 2017 results were also indicative of an increasingly competitive housing market engaged in a tug of war for market share. Market share for 2×4 construction fell from 12.8% to 12.5%, registering its first decline since the 1980s. Prefab market share eroded 0.9% to 14.4%. Post and Beam and non-wood others regained 0.5% and 0.8% respectively. The recent slowdown in market share growth in platform frame construction gives us pause for concern.