Basically the decline in starts have been easing since falling 44 percent in September, which was the biggest slide since the government began keeping comparable figures in 1965. On an annualized basis, builders broke ground on 1.187 million new homes and condominiums in January, which was the most since last June.
And the problem is not simply restricted to domestic housing, as the chart below comparing starts measured by surface area between private residential and total (including non-residential and public) construction shows.
A rapid turnaround in the current situation is not expected. The Japanese Real Estate Economic Research Institute predict that condominium sales may fall for a third consecutive year in 2008. Condominium sales could well fall 8.4 percent to 123,000 units this year, after a 14 percent drop in 2007, the institute said in a report released through the Ministry of Land, Infrastructure and Transportation in mid February. Total sales dropped to 133,000 units in 2007 as the average price per unit rose 7.1 percent, the institute said. Sales by value fell 8.1 percent to 5.1 trillion yen ($47 billion). Condo prices had surged after commercial land prices rose for the first time in 16 years for the year ended June 30, while raw material costs including steel and copper soared.
As Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo, says "the downturn in residential investment involves more than just a policy mistake by the land ministry,...the steep climb in land and housing prices over the past two to three years despite sluggish nominal wages has significantly reduced affordability."
That is expect stabilisation, but don't expect a sudden return to expansion.
