Mizuho 1038 real_estate_housing

Table of Contents

1, Comprehensive Industry - Japan

2, Iron and Steel - Japan

3, Non-ferrous Metals - Japan

4, Paper and Pulp (Japanese only)

5, Cement - Japan

6, Chemicals - Japan

7, Pharmaceuticals - Japan

8, Petroleum - Japan

9, Automobiles - Japan

10, Shipbuilding (Japanese only)

11, General Machinery (Japanese only)

12, Electronics - Japan

13, IT Services - Japan

14, Telecommunications - Japan

15, Broadcasting (Japanese only)

16, Marine Shipping (Japanese only)

17, Logistics - Japan

18, Electric Power - Japan

19, City Gas (Japanese only)

20, Retail - Japan

21, Food and Beverage - Japan

22, Food Service Industry - Japan

23, Construction (Japanese only)

24, Real Estate and Housing - Japan

25, Travel and Tourism - Japan

26, Nonbank (Credit Cards & Credit) (Japanese

only)

27, HR Service Industry (Japanese only)

Japan Industry Outlook / 38

2012 No.1

Contact: Industry Research Division

Mizuho Corporate Bank, Ltd. [email protected]

http://www.mizuhocbk.com/fin_info/industry/pdf/1038_01.pdf


















mailto:[email protected]


FY2012 Japan Industry Outlook (Real Estate & Housing)

S

Real Estate & Housing

[Summary] (Tokyo Area Land Price Trends) ■ As of July 1, 2011, average land prices in the Tokyo metropolitan area remained on a downwards

trajectory in both the residential and commercial sectors, though the pace of the decline slowed. There is a sense that house prices will bottom out soon after falling from 2008 onwards.

■ In FY2011, land purchases by developers actually slowed for a time as the earthquake dampened consumer sentiments and sales of completed housing were postponed. However, an early upswing in consumer sentiments and a rush of housing starts before the end of the eco-point program are expected to see housing starts rising by 2.4% year-on-year in FY2011 (838,000 units). Certain regions are expected to see housing starts increasing in FY2012 due to support for house building in areas hit by the earthquake. Conditions on the whole though will be bearish due to economic stagnation as reconstruction-related demand peaks out and the global economy faces uncertainty. In FY2012, housing starts are only expected to increase slightly on the previous year.

(The Condominium Market in the Metropolitan Area) ■ The first half of 2011 saw sales being halted or postponed due to impact of the Great East Japan

Earthquake, with the supply of new condominiums dropping temporarily. The second half of the year saw sales picking up at a faster pace than the previous year, with the recovery boosted by a flurry of activity before the end of the eco-point program for houses and the Flat 35S housing loan program (which was subsequently extended). As a result, supply is expected to move flatly for the year on the whole. In 2012, because sales were delayed the previous year due to the earthquake, the supply of new houses is expected to increase by 13.1% y-o-y, while developers are also expected to start purchasing land for building again after a round of inventory disposals.

(Corporate earnings) ■ Despite the limited impact of the Great East Japan Earthquake, the combined FY2011 financial

results of the five major real estate companies saw leasing sales continuing to struggle, with rent levels remaining on a downwards trajectory, so earnings and profits are both expected to decline. Though the condominium sector is expected to recovery in FY2012, the domestic economic slowdown means rent levels are unlikely to rise, so results are expected to move flatly on the whole.

■ The FY2011 financial results of the five major homebuilders reveal that each company remains bullish, with the condominium and built-to-order housing sectors expected to see healthy results. However, a sense of uncertainty has started to assail the housing markets in the wake of the earthquake, so only small rises in earnings and profits are expected. FY2012 will see rising demand related to the reconstruction efforts, particularly in the Tohoku region, while the detached home sector is also expected to move firmly, so rising earnings and profits are expected.

(The Office Building Market in Tokyo’s 23 Wards) ■ The office building market in Tokyo’s 23 wards was buoyed by demand for recently-built

high-grade properties on the back of a sense they were attractively priced. The rising trend of vacancy rates has slowed, with the figures moving flatly throughout the year. However, rents are still on a downwards trajectory and the environment remains tough.

(The Housing Market [Nationwide])

Mizuho Corporate Bank, Industry Research Division 1



-5.0 -5.0 -4.4

-7.3 -6.7 -6.1 -5.6 -6.5

-16.9-16.3

-8.4-10.3

-9.0-7.6-6.9

-5.8

-8.9

-4.1

-1.9-3.3 -2.9 -3.0

1.6

4.8

0.7

-4.3-2.5-5.8 -2.3

-18.0

4.0

12.1

3.9

-3.9-1.6

-10.6

-20

-15

-10

-5

0

5

10

15

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 （FY）

（％）

Residential Land

Commertial Land

[Residential Land] [Commercial Land]Ward 2010 2011 Ward 2010 2011

Chiyoda -6.2 -0.8 Chiyoda -8.7 -3.2Chuo -0.7 -0.9 Chuo -10.8 -3.0

Minato -4.9 -2.1 Minato -7.3 -4.5Shinjuku -4.0 -1.3 Shinjuku -6.5 -3.0Bunkyo -4.6 -2.9 Bunkyo -4.6 -3.6

Taito -5.2 -2.7 Taito -5.9 -3.8Sumida -3.0 -2.4 Sumida -3.8 -1.7

Koto -2.4 -1.6 Koto -3.8 -2.3Shinagawa -4.6 -0.6 Shinagawa -5.9 -1.4

Meguro -4.7 -0.9 Meguro -6.4 -1.8Ota -3.6 -0.9 Ota -4.0 -1.8

Setagaya -3.2 -1.4 Setagaya -3.9 -1.5Shibuya -2.7 -1.6 Shibuya -7.6 -5.8Nakano -4.4 -0.9 Nakano -4.6 -2.1

Suginami -1.9 -0.6 Suginami -3.2 -0.8Toshima -2.5 -2.3 Toshima -2.7 -3.1

Kita -2.0 -1.0 Kita -3.0 -1.6Arakawa -3.1 -1.3 Arakawa -2.8 -2.3Itabashi -3.0 -1.6 Itabashi -3.3 -2.2Nerima -2.3 -0.8 Nerima -2.6 -1.4Adachi -3.7 -1.5 Adachi -3.5 -1.0

Katsushika -2.3 -0.9 Katsushika -3.0 -0.8Edogawa -2.9 -1.8 Edogawa -3.0 -1.4

24

0 0 0 0 0

14

15

40 0 1

61 2

20

25

4 1 1

1620

2928

19 1825

10

47

8 10

3038

38

36

3933 31

42 4538

12

45 40

25

2421

113 1 3 0 02

12 159

2 1 0 0

1115 214

3 1 31 1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

6%～ 3%～6% 0%～3% 0% -3%～0% -6%～-3% ～-6%

I. INDUSTRY TRENDS

1. Tokyo Area Land Price Trends

The benchmark land price for the Tokyo area (Tokyo, Kanagawa, Chiba, Saitama and Ibaraki prefectures) on July 1, 2011 indicated that land prices are continuing to fall, though the margin of decline for both commercial and residential land prices is narrowing (Figure 24-1, 2)

A survey report by the Ministry of Land, Infrastructure, Transport and Tourism on quarterly land price trends revealed that the downwards trend had intensified in the first quarter of 2011 due to the impact of the earthquake, though the subsequent increase in the number of locations seeing rises or no change in prices reveals that the downturn is slowing (Figure 24-3).

Figure 24-3: Changes in the number of land price districts (rate of increase/decrease) in the Tokyo area)

Figure 24-1: Year-on-year changes in Tokyo area benchmark land prices

Source: Figure 24-1 and 24-2, Compiled by MHCB Industry Research Division based on the “Benchmark Land Price” released by the Ministry of Land, Infrastructure, Transport and Tourism

Source: Compiled by MHCB Industry Research Division based on the “Land Price Report” released by the Ministry of Land, Infrastructure, Transport and Tourism

The downtrend in Tokyo area land prices seems to have ended.

Figure 24-2: Year-on-year changes in benchmark land prices in Tokyo’s 23 Wards



Land prices had been falling since the subprime crisis and the Japanese economic slump from autumn 2008 onwards, but the downturn seems to have stopped for a time. The impetus for rising land prices is the return of real estate buyers and a resumption of land purchases for development by developers, with both of these players impacted significantly by the domestic economic situation. Some growth in public demand is expected for FY2012 on the back of reconstruction-related demand and so on, but Europe’s stagnating economy and the persistently strong yen point to uncertainty about the direction of the Japanese economy. Though it seems that land prices are undergoing a gentle recovery, optimism will remain in short supply from hereon. Land prices will continue to tread water in FY2012.

2. The Office Building Market in Tokyo’s 23 Wards

The office building vacancy rate for Tokyo’s 23 wards moved flatly throughout the year to stand at 7.6% in December 2011. The recent deterioration in office market conditions has been halted, though the pace of recovery is muted (Figure 24-4).

The data for building size and area shows signs that the vacancy rate for office buildings (which had been rising (deteriorating) for all building sizes and areas) has peaked out (Figures 24-5, 6).

Source: Compiled by MHCB Industry Research Division based on CBRE, “OFFICE MARKET FLASH”

Vacancy rate at 7.6% as the downwards trend is halted

Vacancy rates peaked out in 2011

Figure 24-4: Trends in office building rents and vacancy ratios in Tokyo’s 23 wards

The key for recovery of real estate market conditions is domestic economy

16,1

20

15,4

10

15,1

90

14,6

70

14,1

10

14,1

80

13,2

20

12,7

60

12,6

80

12,9

80 14,1

60

14,5

90

13,8

00

13,1

10

12,5

30

12,3

00

13,4

80

13,8

60

28,5

8024

,230

20,2

7017

,350

5.6

7.6

3.3

4.0

6.0

5.9

6.96.1

9.2

8.0

6.0

2.8

1.9

4.33.8

5.95.44.7

9.6

7.5

2.0

7.7

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

92/1

2

95/1

2

97/0

3

97/1

2

98/0

9

99/0

6

00/0

3

00/1

2

01/0

9

02/0

6

03/0

3

03/1

2

04/0

9

05/0

6

06/0

3

06/1

2

07/0

9

08/0

6

09/0

3

09/1

2

10/0

9

11/0

6

（Yen／tsubo）

0

2

4

6

8

10(%)

Average Offered Rate

Vacancy Ratio(RHA)

11/1

2


Source: Compiled by MHCB Industry Research Division based onSanko Estate Co., Ltd. “Office Market” Note: 5 central wards: Chiyoda, Chuo, Minato, Shinjuku and Shibuya

Figure 24-5: Changes in office building vacancy ratios in Tokyo’s 5 central wards by size

Figure 24-6: Changes in office building vacancy ratios in Tokyo’s 5 central wards

Source Compiled by MHCB Industry Research Division based on CBRE, “OFFICE MARKET FLASH”

0.0％

2.0％

4.0％

6.0％

8.0％

10.0％

12.0％

14.0％

01/0

101

/05

01/0

902

/01

02/0

502

/09

03/0

103

/05

03/0

904

/01

04/0

504

/09

05/0

105

/05

05/0

906

/01

06/0

506

/09

07/0

107

/05

07/0

908

/01

08/0

508

/09

09/0

109

/05

09/0

910

/01

10/0

510

/09

11/0

111

/05

11/0

9

Huge-sized building

Large-sized building

Medium-sized building

Small-sized building

0

1

2

3

4

5

6

7

8

9

07/0

1

07/0

5

07/0

9

08/0

1

08/0

5

08/0

9

09/0

1

09/0

5

09/0

9

10/0

1

10/0

5

10/0

9

11/0

1

11/0

5

11/0

9

(%)

Vacancy rate (5 central wards) (RHA)

The vacancy rate for medium-sized office buildings in particular has shown signs of peaking out at last after having faced relatively tough conditions for a time (Figure 24-5). The persistent deterioration of vacancy rates was down to the ambiguous position occupied by medium-sized office buildings - they do not meet the demands of tenants who select office space based on the office environment and their own business performance (which determines their ability to pay the rent). However, there are signs that vacancy rates are finally peaking out for these medium-sized office buildings too and, as mentioned above, the vacancy rate of office buildings in Tokyo’s 23 wards appears to be improving for all areas or sizes.

The vacancy rate for medium-sized office buildings has also peaked out

At the same time, office building rents continue to fall in Tokyo’s 23 wards (Figure 24-4). Rents remain on

a downwards trajectory However, signs of an end to this long-standing downturn can be observed in the

data for average office building rent in the five main wards (Figure 24-7). The downward revision of rents has dredged up tenant demand and, as indicated above, the vacancy rate has shown improvements. In the wake of this improvement in vacancy rates, signs pointed to a gradual improvement in rent levels, focused mainly on buildings that fulfil tenant requirements. Quake-resistant/stable buildings in particular have seen demand rising after the earthquake, while rising demand for prime high-rent real estate in Tokyo’s five main wards has also supported this improvement.



Figure 24-7: Year-on-year changes in average office building rent in the five main wards.

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

07/0

1

07/0

5

07/0

9

08/0

1

08/0

5

08/0

9

09/0

1

09/0

5

09/0

9

10/0

1

10/0

5

10/0

9

11/0

1

11/0

5

11/0

9

(%)

Avarage Offered Rate (5 central wards)

Source: Compiled by MHCB Industry Research Division based on CBRE, “OFFICE MARKET FLASH”

Tokyo’s labor force increased sharply until around 2007 as people returned to the city center. Though the brakes have been applied to this trend, labor force numbers remain at high levels (Figure 24-9). The ratio of job offers to job seekers also continues to improve after hitting bottom in the latter half of 2009 (Figure 24-10). However, global economic uncertainty and the persistently strong yen mean that a Japanese economic recovery is not on the cards, while an upswing in corporate performance is also unlikely. Furthermore, the supply of large-sized office buildings is set to rise to 1.96 million square meters in 2012, the third highest figure for the past ten years (Figures 24-8, 11), so there are concerns for a supply-led deterioration in the supply and demand environment.

The supply and demand balance deteriorated in 2012 due to the large-scale supply of office space

Given the uncertainty hovering over the Japanese economy, as mentioned bove, the office building market in Tokyo’s 23 wards will probably see a

commensurate supply of office space, so vacancy rates are set to worsen to hit 7.7% for the full year in 2012. Large-scale supply and a slow recovery in corporate ability to pay rents suggest that more time will be needed before average rents across Tokyo’s 23 wards start to recover.

a

Vacancy rates continue to deteriorate and average rents continue to fall across Tokyo’s 23 wards

Source: Compiled by MHCB Industry Research Divisionbased on Mori Building Co., “Urban Renewal andEnvironmental Infrastructure,”Mizuho Securities Co, “Mizuho Securities Real Estate Market Report,” etc. (Figures for FY2012 and after are based on MHCB Industry Research Division forecasts)

Figure 24-8: Changes in the supply of major large-sized office buildings in Tokyo’s 23 wards

183

92

119

74

99

36

61

90

143

255

101

165

205

54

8874

196

113125

56

118122 127

0

50

100

150

200

250

300

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 (FY)

(10,000㎡)

Forecast as ofJanuary 2012




6000

6200

6400

6600

6800

7000

7200

7400

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2012

(Jan

-Mar

)

2012

(Apr

-Jun

)

2012

(Jul

-Sep

)

(FY)

(Thousand)

Building Name LocationTotal Floor

Area(㎡)

ScheduledCompletion

DateDeveloper

PF Project Office Building (Palace Hotel Rebuild Project) Marunouchi, ChiyodaWard

68,000 Jan-12 Palace Hotel

Marunouchi Eiraku Building (Marunouchi 1-4 project) Marunouchi, ChiyodaWard

139,728 Jan-12 Mitsubishi Estate, Mitsubishi Tokyo UFJ Bank, Sumitomo Trust, Mitsubishi UFJ Trust)

Akasaka K TOWER (Motoakasaka K Project) Motoakasaka, MinatoWard 53,702 Jan-12 Kajima Corporation

Mitsui Sumitomo Insurance New Building Kandasurugadai,Chiyoda Ward

64,800 Feb-12 Mitsui Sumitomo Insurance Company, Limited

TEPCO Toyosu District Planning (A1 Block) Toyosu, Koto Ward 72,000 Mar-12

Harumi Front Tower (Harumi 2-chome City Planning for 2nd-4th Blocks) Harumi, Chuo Ward 43,493 Mar-12 Harumi 2-chome Development Specific Purpose Company (Mitsubishi Estate, KajimaCorporation)

DiverCity Tokyo Aomi, Koto Ward 64,880 Mar-12 Aomi Q Specific Purpose Company (Mitsui Fudosan, Daiwa House, The Sankei Building,Fuji Television Network)

Shibuya Hikarie Shibuya, ShibuyaWard 50,000 Apr-12 Council for Promotion of the Shibuya New Cultural District Development Project (Tokyu

Corporation, Tokyo Metro, Toho Real Estate, etc.)Sumitomo Real Estate Shibuya Garden Tower (Nanpeidaicho project/FormerSite of NCR Japan Head Office Building, etc.)

Nanpeidaicho,Shibuya Ward 59,375 Apr-12 Sumitomo Realty & Development

Shinjuku East Side Square Shinjuku, ShinjukuWard

148,700 Apr-12 Shinjuku 6-chome Specific Purpose Company (Mitsubishi Estate, Nippon Tochi-Tatemono,Daiwa House, Heiwa Real Estate, etc.)

JP Tower (Tokyo Central Post Office Rebuilding) Marunouchi, ChiyodaWard

212,131 Apr-12 Japan Post Holdings

NAKANO CENTRAL PARK EAST Nakano, Nakano Ward 39,025 Apr-12 Nakano Station Area Development Specific Purpose Company (Tokyo Tatemono)NAKANO CENTRAL PARK SOUTH Nakano, Nakano Ward 151,577 Apr-12 Nakano Station Area Development Specific Purpose Company (Tokyo Tatemono)Tokyo Skytree East Tower Oshiage, Sumida

Ward 25,300 May-12 Tobu Railway, etc.Kyobashi 2-chome 16 District, A Building (Shimizu Corporation New OfficeBuilding)

Kyobashi, ChiyodaWard

51,800 May-12 Shimizu Corporation

Mita Bellju Building Mita, Minato Ward 55,811 May-12 BelljuJR Minami Shinjuku Building Yoyogi, Shibuya

Ward 36,000 Jun-12 East Japan Railway Company

Rebuild of Dai-ichi Life Insurance Sogo-building Kyobashi, ChiyodaWard

23,811 Jun-12 The Dai-ichi Life Insurance Company

Redevelopment of Toranomon/Roppongi District, Complex BuildingRoppongi andToranomon, MinatoWard

143,720 Jun-12 Redevelopment Association (Mori building, etc.)

Otemachi District Second Redevelopment, A Building Otemachi, ChiyodaWard

110,000 Sep-12 Urban Renaissance Agency, NTT Urban Development, Mitsubishi Estate, The SankeiBuilding, etc.

Otemachi District Second Redevelopment, B Building Otemachi, ChiyodaWard

132,500 Sep-12 Urban Renaissance Agency, Mitsubishi Estate

Shinakasaka Center Building Motoakasaka, MinatoWard

39,803 Sep-12 Kanden-fudosan

Meguro 1-chome Project Meguro, MeguroWard 22,800 Sep-12 Shimizu Corporation

Meiji-Yasuda Life Insurance New Toyo Building Toyo, Koto Ward 96,000 Nov-12 Meiji Yasuda Life Insurance Company

Rebuilding of Yanase Head Office Shibaura, MinatoWard 23,979 Nov-12

Kanda Manseibashi Building Project (Former Site of Transportation Museum,etc.)

Kandasudacho,Chiyoda Ward 28,499 Dec-12 East Japan Railway Company

Source: Compiled by MHCB Industry Research Division based on Mori Building Co., “Urban Renewal andEnvironmental Infrastructure,” Mizuho Securities Co, “Mizuho Securities Real Estate Market Report,” etc.

Figure 24-10: Changes in the vacancy rate and the job offers-to-job seekers ratio in Tokyo’s 5 central wards

Source: Compiled by MHCB Industry Research Divisionbased on the Ministry of Health, Labour and Welfare for the job offers-to-job seekers ratio and Miki Shoji Co., Ltd. for the vacancy rate

Figure 24-9: Changes in Tokyo’s labor force

Source: Compiled by MHCB Industry Research Divisionbased on the Bureau of General Affairs, Tokyo Metropolitan Government

Figure 24-11: Major office buildings to be completed in 2012 (20,000 m2 or larger)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Apr

-200

5

Oct

-200

5

Apr

-200

6

Oct

-200

6

Apr

-200

7

Oct

-200

7

Apr

-200

8

Oct

-200

8

Apr

-200

9

Oct

-200

9

Apr

-201

0

Oct

-201

0

Apr

-201

1

Oct

-201

1

(T imes)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0(%)

Job offers-to-job seekers ratio (nationwides)Job offers-to-jobs ratio (Tokyo)Vacancy ratio (RHA)



Source: Figure 24-12 and 24-13, Compiled by MHCB Industry Research Division based on the Construction Research Institute, “Monthly Housing Starts Statistics” Figures for new housing starts FY2011and FY2012 are based on MHCB Industry Research Division forecasts

3. The Housing Market (Nationwide)

In FY2011, the percentage of housing starts accounted for by the three earthquake-struck prefectures in the Tohoku region (Iwate, Miyagi and Fukushima) was relatively small, so the direct impact of the earthquake was quite limited (Figure 24-16). In fact, land purchases by developers actually slowed down for a time as the earthquake dampened consumer sentiments and sales of completed housing were postponed. However, an early upswing in consumer sentiments and a rush of housing starts before the end of the eco-point program are expected to see housing starts rising by 2.4% year-on-year in FY2011 (838,000 units).

Certain regions are expected to see housing starts increasing in FY2012 due to support for house building in areas hit by the earthquake. Conditions on the whole though will be bearish due to economic stagnation as reconstruction-related demand peaks out and the global economy faces uncertainty. Housing starts for the year are forecast to increase slightly on the previous year (842,000).

Figure 24-13: Changes in growth and contribution by use (half year)

Figure 24-12: Changes in new housing starts

Housing starts expected to increase slightly y-o-y in FY2012

Housing starts rose by 2.4% y-o-y in FY2011

-8.8

-33.9

-14.6

-3.2 -3.4-2.2

-2.5

0.9 4.22.6

0.73.5

6.03.8 1.9

-19.7 -19.1

8.9 6.2

5.1

6.1

-40

-36

-32

-28

-24

-20

-16

-12

-8

-4

0

4

8

12

FY01

/1H

FY01

/2H

FY02

/1H

FY02

/2H

FY03

/1H

FY03

/2H

FY04

/1H

FY04

/2H

FY05

/1H

FY05

/2H

FY06

/1H

FY06

/2H

FY07

/1H

FY07

/2H

FY08

/1H

FY08

/2H

FY09

/1H

FY09

/2H

FY10

/1H

FY10

/2H

FY11

/1H

（％）

Owner-occupied housesHouses for rentHouses for sale-Detached houses, etc.Houses for sale-CondominiumsTotal

　

45.1 43.847.6

43.837.7 36.6 37.3 36.7

31.2 28.7 30.9 30.6 31.7

51.642.6

41.8

44.2 45.5 45.9 46.7

43.1

31.1 29.2 28.5 27.3

21.1

19.221.8

22.3 20.2

16.0

6.7

13.6

12.9

9.5

31.135.3 35.6

44.5

44.4

51.8 53.8

16.5

20.7

19.8

16.6 23.124.2

9.8 11.9 12.2

10.712.1

11.813.8

13.9

12.6

11.6

11.911.3

13.8

11.311.8 12.0

-2.4

2.5

-25.4

-19.4

4.0

-12.1

1.7

-17.7

4.7

2.9-1.1

-3.3

0.3

5.62.4

0.4

0

20

40

60

80

100

120

140

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011e

2012e

(FY)

(万戸)

-60

-50

-40

-30

-20

-10

0

10

（％）

134 .1

118 .0122 .6 121 .3

117 .3 114 .6117 .4

119 .3

128 .5124 .9

103 .5103 .9

77 .583 .8

81 .984 .2

Owner-occupied houses House for rent

Houses for sale-Condominiumes Houses for sale-Detached houses, etc.

Year-on-year (RHA)

(10,000 units)


【Actual】　 FY10 FY11 FY12 FY10/1H FY10/2H FY11/1H FY11/2H FY12/1H FY12/2H

(Units) (Actual) (Estimate) (Forecast) (Actual) (Actual) (Actual) (Estimate) (Forecast) (Forecast)No. of units

(1,000) 819.0 838.4 842.0 407.9 411.1 432.8 405.6 433.4 408.6Area （million

㎡） 73.9 76.2 76.7 37.1 36.7 39.5 36.7 40.0 37.4No. of units

(1,000) 308.5 306.1 317.2 159.3 149.2 162.4 143.7 167.2 150.0No. of units

(1,000) 291.8 284.5 273.1 146.3 145.6 147.2 137.3 140.0 133.1No. of units

(1,000) 212.1 237.7 242.2 98.8 113.3 118.8 118.9 121.2 121.0

Detached houses, etc.No. of units

(1,000) 114.1 118.3 120.4 56.3 57.8 59.5 58.8 60.7 59.7Collective housing

No. of units(1,000) 98.0 119.4 121.8 42.5 55.5 59.3 60.1 60.5 61.3

【Rate of Increase and Decrease】　 FY10 FY11 FY12 FY10/1H FY10/2H FY11/1H FY11/2H FY12/1H FY12/2H

(Units) (Actual) (Estimate) (Forecast) (Actual) (Actual) (Actual) (Estimate) (Forecast) (Forecast)

（％）＋ 5.6% ＋ 2.4% ＋ 0.4% ＋ 6.2% ＋ 5.1% ＋ 6.1% - 1.3% ＋ 0.1% ＋ 0.7%

（％）＋ 9.0% ＋ 3.1% ＋ 0.7% ＋ 9.5% ＋ 8.6% ＋ 6.3% - 0.1% ＋ 1.3% ＋ 1.9%

（％）＋ 7.6% - 0.8% ＋ 3.9% ＋ 7.4% ＋ 7.6% ＋ 2.0% - 3.7% ＋ 2.9% ＋ 4.4%

（％） - 6.3% - 2.5% - 4.0% - 3.7% - 8.8% ＋ 0.6% - 5.7% - 4.9% - 3.1%

（％）＋ 29.6% ＋ 12.1% ＋ 1.9% ＋ 28.8% ＋ 30.4% ＋ 20.2% ＋ 5.0% ＋ 2.0% ＋ 1.8%Detached houses, etc. （％）＋ 19.0% ＋ 3.6% ＋ 1.8% ＋ 23.8% ＋ 14.6% ＋ 5.6% ＋ 1.8% ＋ 2.1% ＋ 1.5%

Collective housing（％）＋ 44.7% ＋ 21.9% ＋ 2.0% ＋ 36.1% ＋ 52.1% ＋ 39.5% ＋ 8.3% ＋ 2.0% ＋ 2.0%

No. of housing starts

Floor Area

Owner-occupied houses

Houses for rent

Houses for sale

Houses for sale

No. of housing starts

Floor Area

Owner-occupied houses

Houses for rent

Figure 24-14: Housing starts in Japan by use

Source: Compiled by MHCB Industry Research Division based on the Construction Research Institute, “Monthly Statistics of Residential Construction Starts” Note: Figures for FY2011/2H and FY2012 are based on MHCB Industry Research Division forecasts

(Owner-occupied houses)

Starts dropped by 0.8% y-o-y in FY2011

Starts expected to climb 3.9% y-o-y in FY2012

Starts for owner-occupied houses in FY2011 are expected to fall 0.8% compared to FY2010.

Starts in the first half of the year were boosted by a rush of demand before the end of the eco-point program for houses (covering started by December 31, 2011), though starts then stagnated in the second half of the year as the aforementioned demand rush eased off (Figure 24-14).

FY2012 is expected to see the commencement of house building in areas hit by the earthquake (especially the Tohoku region) on the back of reconstruction-related support. In addition to this temporary boost in demand on the back of support for house building, conditions will also be favorable to house buyers due to the recommencement of the eco-point program for houses as well as the trend towards low interest rates on housing loans. As a result, housing starts are forecast to grow by 3.9% year-on-year as construction companies beef up their supply (Figure 24-14).




Figure 24-15: Changes in the rate of increase/decrease in starts for owner-occupied houses, houses for rent and houses for sale (collective housing and detached houses, etc.) by region

Figure 24-16: Nationwide housing starts and the share of housing starts from the three prefectures of the Tohoku region

Source: Compiled by MHCB Industry Research Division based on the Construction Research Institute, “Monthly Statistics of Residential Construction

Figure 24-17: Financial institution lending attitudes

Source: Compiled by MHCB Industry Research Division based on the Ministry of Land, Infrastructure, Transport and Tourism

Source: Compiled by MHCB Industry Research Division based on the Bank of Japan, “Short-Term Economic Survey of Principal Enterprises in Japan” (Tankan Survey). Note: (Large enterprises) Capital – over 1 billion yen (Mid-tier enterprises) Capital – more than 100 million yen/less than one billion yen (Small- to Medium-sized enterprises) Capital – more than 20 million yen/less than 100 million yen

【Owner-occupied houses】

4.5%

5.8%

9.4%

5.7%

7.3%6.8%

10.1%

8.2%

10.2%

-3.4%

-2.1%-1.4%

-3.0% -3.3%

5.4%

2.0%

-0.4%

1.7%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Met

ropo

litan

are

a

(Tok

yo)

Chu

bu re

gion

Kin

ki re

gion

(Osa

ka)

Hok

kaid

o/To

hoku

Chu

goku

Shik

oku

Kyu

shu

Rate of increase/decrease FY2009-FY2010

Rate of increase/decrease FY2010-FY2011(Apr-Nov)

【Houses for rent】

-4.9%

-1.8%

-16.5%

0.2%

7.6%

-4.3%

-8.3%

-0.5%-1.2%

2.1%

-11.1%

-0.8%

14.2%

1.7%

8.4%

5.0%3.7%

-16.1%-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Met

ropo

litan

are

a

(Tok

yo)

Chu

bu re

gion

Kin

ki re

gion

(Osa

ka)

Hok

kaid

o/To

hoku

Chu

goku

Shik

oku

Kyu

shu



【Houses for sale】

43.0%

28.0%

10.7%14.5%

34.7%37.1%

2.6%5.2%6.6%

1.9%

13.3%

65.7%

20.0% 19.8%

10.6%

0.6%

23.6%

56.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Met

ropo

litan

are

a

(Tok

yo)

Chu

bu re

gion

Kin

ki re

gion

(Osa

ka)

Hok

kaid

o/To

hoku

Chu

goku

Shik

oku

Kyu

shu



3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

08/0

1

08/0

4

08/0

7

08/1

0

09/0

1

09/0

4

09/0

7

09/1

0

10/0

1

10/0

4

10/0

7

10/1

0

11/0

1

11/0

4

11/0

7

11/1

0

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

(Unit)

Nationwide

Three Tohoku prefectures to nationwide ratio

-35.0

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

00.1

-34-

67-

910

-12

01.1

-34-

67-

910

-12

02.1

-34-

67-

910

-12

03.1

-34-

67-

910

-12

04.1

-34-

67-

910

-12

05.1

-34-

67-

910

-12

06.1

-34-

67-

910

-12

07.1

-34-

67-

910

-12

08.1

-34-

67-

910

-12

09.1

-34-

67-

910

-12

10.1

-34-

67-

910

-12

11.1

-34-

67-

910

-12

Real estate (Mid-tier)

Real estate(Small- to medium sized))

20.0

25.0

30.0

35.0DI("Accommodative"

versus "Severe")

Real estate (Large)

Manufacturing (All)

Acc

omm

odat

ive

Seve

re


(Houses for rent)

In FY2011, starts for houses for rent continued to slide overall nationwide (Figures 24-14 and 24-15), falling 2.5% on FY2010 due to: a strong awareness of high risks involved in real estate investment on the back of domestic economic uncertainty; and a deterioration in the borrowing environment (Figure 24-17).

Despite signs of an improvement in the harsh borrowing environment that has assailed the real-estate market up until now (Figure 24-17), the recent economic uncertainty have seen owners becoming more cautious, while builders who lease land to build houses for rent are also becoming more selective about building projects. As a result, any significant improvement in new starts is unlikely, so starts for housing for rent are expected to remain on a downwards trajectory in FY2012, falling 4.0% on the previous year (Figure 24-14).

(Houses for sale – Collective housing)

In FY2011, starts for collective housing for sale are expected to rise 21.9% year-on-year, the largest margin of increase among all types of usage (Figure 24-14).

This is because after having previously having focused on reducing accumulated inventories, developers have now started to resume purchases of new properties, mainly in Japan’s three largest metropolitan areas (where demand remains robust), with this trend then spreading out nationwide (Figure 24-15).

FY2012 is also expected to see vigorous purchases, though the sharp pace of the rise will slow down due to developer concerns about ballooning inventories, so new starts are expected to increase slightly by 2.0% year-on-year (Figure 24-14).

(Houses for sale – Detached houses)

Though condominium developers limited their activities to areas with solid demand in FY2011, power builders used low prices to pursue an aggressive sales strategy in areas not in direct competition with these condominium developers. As a result, starts are expected to increase by 3.6% on FY2010 (Figure 24-14).

In FY2012, though homebuilders with liquidity are expected to remain active, given the uncertainty surrounding the economy at present, home buyers are starting to adopt a wait-and see approach, just like in other housing sectors. As a result, the buoyant market for detached homes for sale may see a slower pace of growth. The market is also reaching a peak in terms of volume too, so

Starts rose significantly by 3.6% y-o-y in FY2011

Starts dropped by 2.5% y-o-y in FY2011

Starts rose significantly by 21.9% y-o-y in FY2011

Starts are expected to increase slightly by 1.8% y-o-y in FY2012

Starts are expected to increase slightly by 2.0% y-o-y in FY2012

Starts are forecast to fall 4.0% y-o-y in FY2012




growth is forecast to increase by around 1.8% year-on-year only (Figure 24-14).

4. The Condominium Market in the Metropolitan Area

In 2011, the supply of new condominiums in the metropolitan area (Tokyo and three surrounding prefectures) moved flatly on the previous year at 44,000 units. This signaled a recovery after several years of stagnation (Figure 24-18). The first half of 2011 saw sales being halted or postponed due to impact of the Great East Japan Earthquake, with the supply of new condominiums dropping temporarily. The second half of the year saw sales picking up again though, with the recovery boosted by a flurry of activity before the end of the eco-point program for houses and the Flat 35S housing loan program (which was subsequently extended). As a result, supply is expected to move flatly for the year on the whole (Figure 24-19).

In 2011, supply moved flatly on the previous year at 44,000 units

Source: Compiled by MHCB Industry Research Division from Haseko Research Institute Inc., “CRI,” and Real Estate Economic Institute Co., “National Condominium Market Trends” Note: Figures for FY2012 are based on MHCB Industry Research Division forecasts

Figure 24-19: Changes in the cumulative supply of condominiums in the metropolitan area

Source: Compiled by MHCB Industry Research Division based on Real Estate Economic Institute Co., “Monthly Real Estate Economic Survey Report”

Figure 24-18: Changes in the supply of condominiums in the metropolitan area

0.82.0 2.3 2.6 2.3 2.2

3.1 3.5 3.2 3.2 3.6

1.7 1.91.6

3.93.1 2.4

1.6 2.0

4.43.64.4

8.98.3 8.5

8.38.58.0

4.5

7.16.6

8.6

9.68.9

8.4

7.4

6.1

4.5

0

1

2

3

4

5

6

7

8

9

10

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

(FY)

(10,000 units)

Kanagawa, Chiba, Saitama prefecturesTokyo (other than 23 wards)Tokyo (23 wards)

5.1

8.58.4

7.4

6.1

4.43.6

4.5

0

1

2

3

4

5

6

7

8

9

Jan Feb Mar Apr Mar Jun Jul Aug Sep Oct Nov Dec

(10,000 units)

20042005200620072008200920102011


Tokyo’s 23 wards continue to retain a high share of the condominium market supply in the metropolitan area (Figure 24-20). This suggests that supply is concentrating on areas where comparatively strong demand can be expected. Under these circumstances, Chiba Prefecture’s share of supply has fallen further since the earthquake (Figure 24-21) and conditions remain comparatively tough.

Supply is recovering, particularly in areas with strong demand

Figure 24-21: Comparison of the cumulative supply of condominiums in the metropolitan area by area

Figure 24-20: Changes in the share of supply in the metropolitan area by area

0 2,000 4,000 6,000 8,000 10,000

23 wards (Yamanote area)

23 wards (Shitamachi area)

Other parts of Tokyo

Kanagawa pref.

Saitama pref.

Chiba pref.

(Unit)

2010 (Jan-Nov)

2011(Jan-Nov)

56.4%

39.8%

53.2%

13.2%

7.8%

21.2%

25.8%

5%

15%

25%

35%

45%

55%

65%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 (FY)

Supply share (Tokyo/Metropolitan area)Supply share (Saitama/Metropolitan area)Supply share (Chiba/Metropolitan area)Supply share (Kanagawa/Metropolitan area)

Source: Compiled by MHCB Industry Research Division based on Real Estate Economic Institute Co., “Monthly Real Estate Economic Survey Report”

Source: Compiled by MHCB Industry Research Division based on Haseko Research Institute Inc., “CRI,”

The data reveals that average selling prices in the metropolitan areas grew in 2010, particularly in areas with comparatively high selling prices, though prices are falling at present due to the slight decentralization of selling areas entering 2011 (Figure 24-22). As symbolized by the 30% year-on-year fall in the number of sales of luxury apartments (the so-called ‘okushon,’ or 100-million-yen apartments), selling prices will continue to be determined by buyer sentiments.

Selling prices will continue to be determined by buyer sentiments

Condominium demand remains buoyant

The contract ratio in the first month remained at elevated levels, with the latest three-month moving average as of December 2011 at 76.4%, better than the 70% considered a good benchmark for a favorable supply and demand balance. In addition, inventories as of December 2011 stood at 6,166 units, the first end-of-year increase for three years (Figure 24-23). This suggests that developers have eased off from reducing inventories, while buying has also kicked off again. Condominium demand is expected to remain buoyant as selling prices continue to be determined by buyer sentiments, despite a limited supply in areas with firm demand.




Source: Compiled by MHCB Industry Research Division based on Haseko Research Institute Inc., “CRI,”

11,611

4,666

12,427

4,575

6,166

86.3%

72.0%

57.4%

76.4%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

00/1 5 9

01/1 5 9

02/1 5 9

03/1 5 9

04/1 5 9

05/1 5 9

06/1 5 9

07/1 5 9

08/1 5 9

09/1 5 9

10/1 5 9

11/1 5 9

(Unit)

55%

60%

65%

70%

75%

80%

85%

90%

Inventories (LHA) First-month contract rate (3-month moving average, RHA)

3,900

4,000

4,100

4,200

4,300

4,400

4,500

4,600

4,700

4,800

4,900

68 70 72

Selling price per unit (10,000 yen)

2000

Average area

1999

74 76 78 80

20012002

per unit (㎡)

2003JPY40.69 millio74.7㎡

ns

2005JPY41.08millions

2006JPY42.00 millions75.7㎡

2004

2008JPY47.75 millions73.5㎡ 2007

JPY46.44millions75 6㎡

2009JPY45.35millions70.6㎡

2011JPY45.78millions

2010JPY47.16 millions71.0㎡

4,665

5,339

4,389

4,1524,182

4,159

3,575 3,751

3,559

3,679

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 (FY)

(JPY 10,000 y en)

Tokyo's 23 wardsSuburban TokyoKanagawa pref.Chiba pref.Saitama pref.

Source: Compiled by MHCB Industry Research Division based on Real Estate Economic Institute Co.

Figure 24-23: Changes in the first-month contract rate for condominiums and inventories in the metropolitan area

Figure 24-22: Changes in condominium prices per unit and sale area in the metropolitan area and the average selling price by area

[Metropolitan area selling prices and floor area] [Average selling price by area]



-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0(10,000 units)

(10,000 units)

99/1

05/1

03/1

00/1

Diff

eren

ce b

etw

een

units

star

ts an

d un

ipe

r on

the

mar

ket

Number of units started

02/1

01/1

06/1

04/1

08/1

07/1

09/1

11/1

11/1110/1

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

3.0 5.0 7.0 9.0 11.0 13.0(10,000 units)

(10,000 units)

00/1

06/1

Diff

eren

ce b

etw

een

units

star

ts an

d un

ipe

r on

the

mar

ket


07/1

08/1

03/199/1

05/1

02/

04/1

01/1

09/110/1

11/1

11/11

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1.0 2.0 3.0 4.0 5.0 6.0 7.0(10,000 units)

(10,000 units)

Diff

eren

ce b

etw

een

units

star

ts an

d un

ipe

r on

the

mar

ket


08/1

99/1

00/1

01/105/1

07/1

06/1

04/1 02/103/1

09/110/1

11/1

11/11

At the same time, the data for ‘hidden inventories (the difference between the number of condominium starts and the number of condominiums counted as on the market)’ reveals an increase across the Tokyo metropolis and the three adjacent prefectures entering 2011 (Figure 24-24). This level is not that high though and will not prompt concerns over ballooning inventories, but taken together with the sluggish growth of cumulative units on the market, the figure suggests that developers on the supply side have been saddled with already-completed units. This is believed to be due to ballooning inventories after sales were pushed back in the wake of the Great East Japan Earthquake and the subsequent temporary suspension/postponement of sales of already-completed condominiums. In 2012, developers are forecast to continue purchasing land for development, with hearty selling appetite expected. Conditions remain favorable to house buyers due to the continuation of systems such as the eco-point program for houses and the Flat 35S housing loan program as well as persistently low housing loan interest rates. The aforementioned moves to eliminate ‘hidden inventories’ together with an expected flurry of demand in advance of the consumption tax hike suggest that the condominium supply for the year will be around 51,000 units, up on FY2011 (Figure 24-18).

51,000 units expected for 2012

‘Hidden inventories’ are on the increase

Source: Compiled by MHCB Industry Research Division based on the Construction Research Institute, “Monthly Statistics of Residential Construction Starts” and Real Estate Economic Institute Co., “National Condominium Market Trends” Note: Starts: the 12-month cumulative total of monthly starts. The difference between the number of units started and the number of units put on sale: “12-month cumulative total of monthly starts” minus “12-month cumulative total of monthly supply” (assuming that the supply begins 6 months after starts) Figure for November 2011 is the total of 10 months.

Figure 24-24: Changes in the “difference between the number of units started and the number of units put on sale” and “the number of units started”

[Total for the metropolitan area] [Tokyo] [3 adjacent prefectures

(Chiba, Saitama, Kanagawa)]


II. CORPORATE EARNINGS

1. The 5 major real estate companies

Figure 24-25: Performance of 5 major real estate firms

【Actual】 (JPY billions)FY10 FY11 FY12

(Actual) (Estimate) (Forecast)

Sales 3,908.2 3,808.0 3,898.0Operating profit 503.4 441.0 502.0

【Rate of Increase and Decrease】FY10 FY11 FY12

(Actual) (Estimate) (Forecast)

Sales - 0.6% - 2.6% ＋ 2.4%Operating profit ＋ 7.5% - 12.4% ＋ 13.8%

Source: Compiled by MHCB Industry Research Division based on materials for investorrelations (IR) provided by the real estate firms Note: Consolidated basis. Figures for FY2011 and FY2012 are based on MHCB Industry Research Division forecasts. 5 Major firms: Mitsui Fudosan Co., Ltd., Mitsubishi Estate Co., Ltd., Sumitomo Realty & Development Co., Ltd., Tokyu Land Corp. and Tokyo Tatemono Co., Ltd.

FY2011 will see falling income and profits

Despite the limited impact of the Great East Japan Earthquake, the combined FY2011 financial results of the five major real estate companies saw leasing sales continuing to struggle, with rent levels remaining on a downwards trajectory, as mentioned in section one.

The condominium for sales sector is expected to contribute to profits in FY2011 on the back of a resumption of land purchases from FY2010 onwards. However, the sector will face delays in construction projects from the next period onwards due to difficulties in obtaining materials following the Great East Japan Earthquake, so any gains will not be sufficient to cover the shortfall in the leasing sector.

In addition, though company financial results varied somewhat with regards to the performance of sectors such as remodeling, fund business and brokerage for corporate clients, business conditions on the whole remained tough on the back of stagnating real estate market conditions.

There were also cases of companies booking losses due to valuation losses on real estate for sale, so the five major real estate companies are forecast to see income and profits decreasing (Figure 24-25).

The aforementioned glut of office building supply will start in FY2012. Offices in favorable locations/high-spec buildings supplied by the five major real estate companies will move firmly on the whole, including those with tenants. However, given the forecast for office building market conditions in FY2012, it

A slight recovery is expected in FY2012




Source: Compiled by MHCB Industry Research Division based on materials for investor relations (IR) provided by the real estate firms Note: Consolidated basis. Figures for FY2011 and FY2012 are based on MHCB Industry Research Division forecasts. 5 Major firms: Sekisui House, Ltd., Daiwa House Industry Co., Ltd., Sumitomo Forestry Co., Ltd., Sekisui Chemical Co., Ltd., and Asahi Kasei Corp. In case of Sumitomo Forestry, ordinary profit instead of operating profit was used due to limitations of the disclosed information.

seems that companies may need to adjust rents downwards somewhat, so more time will be needed before the leasing sector returns to profitability.

The condominium market is also set to trade flatly on FY2011 judging from purchases. Mixed results are expected for other sectors on the back of the fluctuating results in the brokerage and reform industries as well as the varying degrees of success companies have had in selling off assets.

As a result, though the five major real estate companies are expected to improve on FY2011 in which extraordinary losses were posted, performance will be much the same as in FY2010 (Figure 24-25).

2. The 5 Major Home Builders (Housing Sector)

The FY2011 financial results of the five major homebuilders reveal that each company remains bullish on the back of low interest rates and government stimulus programs such as the eco-point program for houses, with the condominium and built-to-order housing sectors expected to see healthy results. Furthermore, the cost cutting measures of each company (such as improvements in operating capacity through factory rationalizations) are starting to bear fruit and the industry seems to emerged from the harsh conditions that prevailed around the time of the Lehman Shock, so the five major homebuilders are forecast to see both income and profits swinging upwards (Figure 24-26).

Figure 24-26: Performance of 5 major home builders

Rising profits and income are expected for FY2011

【Actual】 (JPY billions)FY10 FY11 FY12

(Actual) (Estimate) (Forecast)Sales 6,489.8 6,819.0 7,001.0

Housing sector 3,730.3 3,796.8 4,010.5Operating profit 330.5 384.0 403.0

Housing Sector 202.1 230.9 263.5

【Rate of Increase and Decrease】

FY10 FY11 FY12(Actual) (Estimate) (Forecast)

Sales ＋ 8.5% ＋ 5.1% ＋ 2.7%Housing sector ＋ 7.6% ＋ 1.8% ＋ 5.6%

Operating profit ＋ 160.2% ＋ 16.2% ＋ 4.9%Housing Sector ＋ 314.8% ＋ 14.2% ＋ 14.1%


FY2012 will see rising demand related to the reconstruction efforts, particularly in the Tohoku region, while the detached home sector is also expected to move firmly, centered on the core built-to-order housing sector. The condominium for sale sector will also contribute to profitability through the completion of orders placed when purchases picked up again in earnest from FY2010 onwards.

Rising income and profits expected for FY2012

Companies are also expected to book profits from oversea business initiatives pursued from 2010 onwards, so the FY2011 trend of rising income and profits is expected to continue this year (Figure 24-26).

III. TOPICS – Review of industry sectors with strong mid-term potential: The real estate/housing industry

In the ‘Mizuho Japan Industry Outlook Vol.36’ (released August 19, 2011), we pointed out the changing needs of office building tenants in the aftermath of the Great East Japan Earthquake (growing focus on earthquake resistance, disaster preparedness structures and environmental considerations), but changes in consumer sentiments can also be observed in the housing sector.

The Jyukankyo Research Institute’s ‘Changes to housing sector sentiments in the wake of the Great East Japan Earthquake” (released September 2011) asked potential homebuyers what factors were important to them when choosing a house. According to the paper, the factor with the biggest year-on-year leap in popularity was ‘friendly to the elderly.’ Next up were ‘safety during earthquakes and typhoons’ and ‘energy saving air-conditioners, etc.’ Traditionally important factors such as design, layout and price all dropped points, with interest in performance and functionality growing.

Housing market needs have changed in the wake of the Great East Japan Earthquake

Under these circumstances, a succession of developers and homebuilders in the new housing sector has begun to focus on earthquake resistance and environmental considerations. For example, Misawa Homes has announced that almost all of their detached homes will come with a ‘smart home’ option that includes a photovoltaic power system, storage batteries, a Home Energy Management System (HEMS) and so on.

The new housing starts market is in danger of shrinking

Reform demand related to earthquake resistance or environmental purposes is expected to grow. Developers and homebuilders in the existing homes sector have been slow to react though, in contrast to their initiatives in the new housing sector. Nearly half of all existing homes within Japan are said to have been built over 30 years ago, but the major developers and homebuilders only account for around 10% of the reform market. There are concerns of a long-term slide in the number of new housing starts on the back of a declining population (due to an ageing society and less children being born) and the longevity of housing built since the earthquake resistance regulations were introduced. The traditional business structure of the new housing starts market will reach a limit sometime in the future.



At the same time, the government is clearly placing great importance on housing stock. June 2009 saw the start of the ‘approved excellent long-term housing system’ as part of the policy shift from the flow consumption model to the stock model, as mandated in the Basic Act for Housing (implemented in June, 2006). 244,000 houses have already been approved under this system as of December 2011. Furthermore, the New Growth Strategy, announced in 2010, states that ‘Japan must change from a society that continually builds housing only to tear it down to one that creates and maintains high‐quality housing, and uses it carefully for a long time’ adding that it is therefore ‘necessary to effectively utilize the nation’s 1 quadrillion yen in housing, land, and other tangible assets,’ thus placing the utilization of housing stock as a key facet of the government’s growth strategy.

Government policy has shifted from a flow model to a stock model

The utilization of existing housing stock would bring a number of benefits. For a start, it would increase the opportunities for young, first-time buyers to purchase a home. By trading existing homes at reasonable and appropriate prices, it will be possible to lower housing costs commensurately and thus increase the house-buying options for people who have so far been unable to purchase new housing. Secondly, it would give elderly people more opportunities to move house. If the elderly could sell or dispose of their housing at a suitable price, they could secure some money to live on and also move easily to other housing, such as serviced retirement homes. There is also demand for financial innovations such as second mortgages. Thirdly, it would lead to development in sectors related to housing and prompt the creation of new business models in new sectors such as the reform and renovation of pre-existing stock, home inspections, information provision and mediation.

The utilization of existing homes would bring many benefits

Industry top players need to launch their own independent initiatives

There are three factors blocking the utilization of existing housing stock, namely (1) asymmetrical information, (2) the preference of sellers for new housing sales and (3) the lack of financial instruments that deal with existing homes. Consumers are without doubt faced with a lack of suitable knowledge with regards to the quality, value and line-up of existing houses, making it difficult for the layperson to enter the market. At the same time, new housing starts are more profitable for sellers than lower-cost work such as reforms, while there is an undeniable tendency to consider existing home as costing more. Also, there is a scarcity of financial instruments to promote existing-home utilization, such as reverse mortgages or reform loans.

However, the era of ‘if you build it, it will sell’ is coming to an end, while new initiatives that focus on existing stock have now become an important topic. Under these circumstances, companies should aim to move away from a model that focuses exclusively on new housing starts towards one that views existing stock and a resource and a business opportunity. The top players in the industry need to proactively shake up their business models and actively disclose information to consumers.



Takafumi Shukuri

[email protected], Infrastructure & Transport Team

Industry Research DivisionMizuho Corporate Bank, Ltd



Mizuho 1038 real_estate_housing

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