Japan Real Time Charts and Data

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Japan related comment. He also maintains a collection of constantly updated Japan data charts with short updates on a Storify dedicated page Is Japan Once More Back in Deflation?

Tuesday, March 04, 2008

Japan Housing Starts January 2008

Japan's housing construction sector crisis does seem to be flattening out, and new starts fell at the slowest pace in seven months in January. Ground broken on new homes and condominiums was still down - 5.7 percent from a year earlier - but this following a much stronger rate of decline - 19.2 percent - in December, and if we look at the chart - which is based on data from the Japanese Land Ministry, and measured in numbers of new units - we can see that the very sharp and dramatic rate of decline which took place in August/September has gradually been petering out. Of course, a reduction in the rate of decline hardly represents a recovery, but it is still welcome news, and does suggest that the crisis may finally be hitting bottom. The pace of any recovery will depend above all on what the root of the problem actually was. One part of the picture is undoubtedly the change in building regulations, but the coincidence that the timing of the strongest part of the slump coincided with the advent of the property related global credit crunch is surely too strong to simply ignore. Also, given that the crunch continues, and the medium term consequences for contsruction activity worldwide are still far from clear, we need to be cautious I think about any premature talk of "recovery". "Sufficient unto the day...." and all that.

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.