Japan Housing Starts Post First Drop in 10 Months on Quake
April 28, 2011, 2:33 AM EDTBy Kathleen Chu and Katsuyo Kuwako
(Updates with analyst’s comment in third paragraph.)
April 28 (Bloomberg) -- Japan’s housing starts dropped the first time in 10 months as the nation’s strongest earthquake on March 11 sapped demand, halting the strongest recovery in the real estate market in almost 15 years.
Construction companies broke ground on 2.4 percent fewer homes in March from a year earlier, according a report released today by the Ministry of Land, Infrastructure, Transport and Tourism in Tokyo. Housing starts were expected to fall 1.1 percent, based on the median estimate of 23 economists in a Bloomberg News survey.
“With a shortage of building material supply, housing numbers will drop in the next couple of months,” said Masahiro Mochizuki, an analyst at Credit Suisse Securities (Japan) Ltd. in Tokyo. “Even after the revival of supply, builders will face another challenge, which is a lack of demand by potential buyers.”
Demand for new homes showed signs of recovery before the magnitude-9 temblor last month, with starts gaining for nine straight months, the longest streak since 1996. The economy took a bigger hit than anticipated, with factory output falling the most since at least the end of the U.S. occupation, according to data released today, underscoring calls for the central bank to add stimulus.
Housing starts slid to the equivalent of an annual 807,000 units in March, according to the report, the lowest since July. They were expected to drop to an annualized 814,000 units, according to the median estimate of 18 economists surveyed.
‘Remain Harsh’
“With the uncertainties and anxiety about the future, it will take time for people to actively buy new homes,” Taro Saito, senior economist in Tokyo at NLI Research Institute Ltd., said before the announcement. “The housing market will remain harsh throughout this year.”
Prime Minister Naoto Kan last week proposed a 4 trillion yen ($49 billion) additional budget that’s likely to be the first of several packages to rebuild areas devastated by the temblor and tsunami.
“The recent earthquake could cool house buying sentiment for around three to six months, leading to a temporary decline in demand,” Masahiro Mochizuki, an analyst at Credit Suisse Securities (Japan) Ltd., said in a report. “However, from fiscal year 2012, we expect housing starts to receive a boost from demand that failed to emerge in 2011 from reconstruction.”
Quake Damages
Factory output dropped a record 15.3 percent from February and household spending plunged 8.5 percent from a year earlier, government reports showed today. Retail sales fell the most in 13 years, according to data released yesterday.
Last month’s quake and tsunami destroyed and damaged about 300,000 homes, forcing 130,155 people to stay in shelters throughout 17 prefectures and the capital, according to the National Police Agency.
The housing market boom in 1996 came about a year after the Great Hanshin Earthquake, when a magnitude-7.3 temblor hit Kobe and parts of western Japan on Jan. 17, 1995, according to the land ministry and Japan Meteorological Agency. Housing starts rose for 10 months through December 1996.
Shares of Daiwa House Industry Co., Japan’s largest home builder, fell 3 percent on the Tokyo Stock Exchange since the quake, while shares of Sekisui House Ltd., Japan’s second largest, dropped 4.7 percent.
Sluggish Sales
The number of condominiums offered for sale in Tokyo and surrounding areas may drop 25 percent in April as developers withhold sales of some projects, the Real Estate Economic Research Institute said.
Annual condominium supply in Tokyo region, which rose for the first time in five years in 2010, probably won’t reach a forecast of 50,000 units this year because of a possible slowdown of Japan’s economy, said Akio Fukuda, a manager at Real Estate Economic Institute in Tokyo.
Last month’s quake and tsunami also damaged Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant, 220 kilometers (137 miles) north of Tokyo, causing radiation leaks.
“Apartment sales will be sluggish and it’s hard to tell when a recovery will take place at the moment,” said Mikio Namiki, an analyst at Mizuho Securities Co. in Tokyo. “With relatively big aftershocks and radiation leaks continuing, no one would be interested in buying a home now.”
--With assistance from Theresa Barraclough and Toru Fujioka in Tokyo. Editors: Linus Chua, Tomoko Yamazaki
To contact the reporters on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
