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    Mizuho 1038 real_estate_housing Mizuho 1038 real_estate_housing Document Transcript

    • Japan Industry Outlook / 38 2012 No.1 Table of Contents1, Comprehensive Industry - Japan 15, Broadcasting (Japanese only)2, Iron and Steel - Japan 16, Marine Shipping (Japanese only)3, Non-ferrous Metals - Japan 17, Logistics - Japan4, Paper and Pulp (Japanese only) 18, Electric Power - Japan5, Cement - Japan 19, City Gas (Japanese only)6, Chemicals - Japan 20, Retail - Japan7, Pharmaceuticals - Japan 21, Food and Beverage - Japan8, Petroleum - Japan 22, Food Service Industry - Japan9, Automobiles - Japan 23, Construction (Japanese only)10, Shipbuilding (Japanese only) 24, Real Estate and Housing - Japan11, General Machinery (Japanese only) 25, Travel and Tourism - Japan12, Electronics - Japan 26, Nonbank (Credit Cards & Credit) (Japanese13, IT Services - Japan only)14, Telecommunications - Japan 27, HR Service Industry (Japanese only) Contact: Industry Research Division Mizuho Corporate Bank, Ltd. mizuho.ird@mizuho-cb.co.jp
    • FY2012 Japan Industry Outlook (Real Estate & Housing) 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.(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])■ 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 S 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. 1 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) I. INDUSTRY TRENDS 1. Tokyo Area Land Price Trends The downtrend in The benchmark land price for the Tokyo area (Tokyo, Kanagawa, Chiba, Tokyo area land Saitama and Ibaraki prefectures) on July 1, 2011 indicated that land prices are prices seems to have continuing to fall, though the margin of decline for both commercial and ended. residential land prices is narrowing (Figure 24-1, 2) Figure 24-2: Year-on-year changes in benchmark landFigure 24-1: Year-on-year changes in Tokyo area benchmark prices in Tokyo’s 23 Wards land prices (%) [Residential Land] [Commercial Land] 15 12.1 Ward 2010 2011 Ward 2010 2011 10 Chiyoda -6.2 -0.8 Chiyoda -8.7 -3.2 Chuo -0.7 -0.9 Chuo -10.8 -3.0 3.9 4.8 4.0 Minato -4.9 -2.1 Minato -7.3 -4.5 5 Shinjuku -4.0 -1.3 Shinjuku -6.5 -3.0 0.7 1.6 Bunkyo -4.6 -2.9 Bunkyo -4.6 -3.6 -1.9 0 -1.6 -3.0 Taito -5.2 -2.7 Taito -5.9 -3.8 -3.3 -2.9 -4.4 -5.0 -5.0 -3.9 -5.6 Sumida -3.0 -2.4 Sumida -3.8 -1.7 -6.1 -2.5 -6.5 -2.3 -5 -7.3 -6.7-5.8 Koto -2.4 -1.6 Koto -3.8 -2.3 -4.3 -4.1 -5.8 Shinagawa -4.6 -0.6 Shinagawa -5.9 -1.4-10 -7.6 -6.9 Meguro -4.7 -0.9 Meguro -6.4 -1.8 -8.4 -9.0 -8.9 -10.6 -10.3 Ota -3.6 -0.9 Ota -4.0 -1.8-15 Residential Land Setagaya -3.2 -1.4 Setagaya -3.9 -1.5 Commertial Land Shibuya -2.7 -1.6 Shibuya -7.6 -5.8 -16.3 Nakano -4.4 -0.9 Nakano -4.6 -2.1-20 -18.0 -16.9 Suginami -1.9 -0.6 Suginami -3.2 -0.8 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ( FY) Toshima -2.5 -2.3 Toshima -2.7 -3.1 Kita -2.0 -1.0 Kita -3.0 -1.6 Arakawa -3.1 -1.3 Arakawa -2.8 -2.3 Source: Figure 24-1 and 24-2, Compiled by Itabashi -3.0 -1.6 Itabashi -3.3 -2.2 MHCB Industry Research Division based on the Nerima -2.3 -0.8 Nerima -2.6 -1.4 Adachi -3.7 -1.5 Adachi -3.5 -1.0 “Benchmark Land Price” released by the Ministry of Katsushika -2.3 -0.9 Katsushika -3.0 -0.8 Land, Infrastructure, Transport and Tourism Edogawa -2.9 -1.8 Edogawa -3.0 -1.4 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) 100% 1 1 2 2 1 3 1 3 0 0 3 3 1 9 90% 12 11 12 15 80% 21 10 24 14 31 Source: Compiled by MHCB Industry 33 38 70% 20 Research Division based on the “Land 25 39 45 42 Price Report” released by the Ministry of 60% 36 50% Land, Infrastructure, Transport and 45 40 47 Tourism 40% 25 38 24 38 28 30% 15 30 29 20 25 20% 16 19 18 10% 10 5 4 8 4 1 2 6 4 1 1 1 2 0% 1 0 1 0 1 0 1 0 0 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 6%~ 3%~6% 0%~3% 0% -3%~0% -6%~-3% ~-6% 2 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) The key for Land prices had been falling since the subprime crisis and the Japanese recovery of real economic slump from autumn 2008 onwards, but the downturn seems to have estate market stopped for a time. The impetus for rising land prices is the return of real estate conditions is domestic buyers and a resumption of land purchases for development by developers, with economy 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 Vacancy rate at The office building vacancy rate for Tokyo’s 23 wards moved flatly throughout 7.6% as the the year to stand at 7.6% in December 2011. The recent deterioration in office downwards market conditions has been halted, though the pace of recovery is muted trend is halted (Figure 24-4). Figure 24-4: Trends in office building rents and vacancy ratios in Tokyo’s 23 wards (Yen/tsubo) (%) 30,000 10 9.29.6 28,000 Average Offered Rate 28,580 8.0 Vacancy Ratio(RHA) 7.7 7.6 8 26,000 7.5 6.9 6.0 6.1 6.0 24,000 5.9 5.6 24,230 5.9 5.4 6 22,000 4.7 4.3 3.8 4.0 20,000 4 20,270 3.3 2.8 18,000 1.9 2.0 17,350 16,000 2 16,120 15,410 15,190 14,670 14,590 14,000 14,180 14,160 14,110 13,860 13,800 13,480 0 13,220 13,110 12,980 12,760 12,680 12,000 12,530 12,300 10,000 8,000 6,000 92/12 95/12 97/03 97/12 98/09 99/06 00/03 00/12 01/09 02/06 03/03 03/12 04/09 05/06 06/03 06/12 07/09 08/06 09/03 09/12 10/09 11/06 11/12 Source: Compiled by MHCB Industry Research Division based on CBRE, “OFFICE MARKET FLASH” Vacancy rates peaked out in The data for building size and area shows signs that the vacancy rate for office 2011 buildings (which had been rising (deteriorating) for all building sizes and areas) has peaked out (Figures 24-5, 6). 3 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) Figure 24-5: Changes in office building vacancy ratios in Figure 24-6: Changes in office building vacancy ratios Tokyo’s 5 central wards by size in Tokyo’s 5 central wards14.0% Huge-sized building (%) Large-sized building 912.0% M edium-sized building 8 Small-sized building10.0% 7 68.0% 56.0% 44.0% 3 22.0% 1 Vacancy rate (5 central wards) (RHA)0.0% 0 01/01 01/05 01/09 02/01 02/05 02/09 03/01 03/05 03/09 04/01 04/05 04/09 05/01 05/05 05/09 06/01 06/05 06/09 07/01 07/05 07/09 08/01 08/05 08/09 09/01 09/05 09/09 10/01 10/05 10/09 11/01 11/05 11/09 07/01 07/05 07/09 08/01 08/05 08/09 09/01 09/05 09/09 10/01 10/05 10/09 11/01 11/05 11/09 Source: Compiled by MHCB Industry Research Division based on Sanko Estate Co., Ltd. “Office Market” Source Compiled by MHCB Industry Research Division based Note: 5 central wards: Chiyoda, Chuo, Minato, Shinjuku and Shibuya on CBRE, “OFFICE MARKET FLASH” The vacancy rate for medium-sized office buildings in particular has shown The vacancy rate signs of peaking out at last after having faced relatively tough conditions for a for medium-sized office buildings time (Figure 24-5). The persistent deterioration of vacancy rates was down to has also peaked the ambiguous position occupied by medium-sized office buildings - they do out 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. At the same time, office building rents continue to fall in Tokyo’s 23 wards Rents remain on (Figure 24-4). 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. 4 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) Figure 24-7: Year-on-year changes in average office building rent in the five main wards. (%) 14 12 Avarage Offered Rate (5 central wards) 10 8 Source: Compiled by MHCB 6 Industry Research Division based on 4 CBRE, “OFFICE MARKET 2 FLASH” 0 -2 -4 -6 -8 -10 07/01 07/05 07/09 08/01 08/05 08/09 09/01 09/05 09/09 10/01 10/05 10/09 11/01 11/05 11/09 Tokyo’s labor force increased sharply until around 2007 as people returned to The supply and demand balance the city center. Though the brakes have been applied to this trend, labor force deteriorated in numbers remain at high levels (Figure 24-9). The ratio of job offers to job 2012 due to the seekers also continues to improve after hitting bottom in the latter half of 2009 large-scale supply (Figure 24-10). However, global economic uncertainty and the persistently of office space 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.Vacancy rates Given the uncertainty hovering over the Japanese economy, as mentionedcontinue to above, the office building market in Tokyo’s 23 wards will probably see adeteriorate and commensurate supply of office space, so vacancy rates are set to worsen to hitaverage rentscontinue to fall 7.7% for the full year in 2012. Large-scale supply and a slow recovery inacross Tokyo’s 23 corporate ability to pay rents suggest that more time will be needed beforewards average rents across Tokyo’s 23 wards start to recover. Figure 24-8: Changes in the supply of major large-sized office buildings in Tokyo’s 23 wards (10,000 ㎡) 300 Source: Compiled by MHCB 255 Industry Research Division Forecast as of 250 based on Mori Building Co., January 2012 205 196 “Urban Renewal and 200 183 Environmental Infrastructure,” 165 143 Mizuho Securities Co, 150 122 127 125 “Mizuho Securities Real Estate 118 119 113 99 101 Market Report,” etc. (Figures 100 92 90 88 74 74 for FY2012 and after are based 61 56 54 50 36 on MHCB Industry Research Division forecasts) 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (FY) 5 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) Figure 24-9: Changes in Tokyo’s labor force Figure 24-10: Changes in the vacancy rate and the job offers-to-job seekers ratio in Tokyo’s 5 central wards(T housand) (T imes) (%) 7400 1.8 10.0 1.6 9.0 7200 1.4 8.0 7000 7.0 1.2 6800 6.0 1 6600 5.0 0.8 4.0 6400 0.6 3.0 6200 0.4 2.0 Job offers-to-job seekers ratio (nationwides) 6000 Job offers-to-jobs ratio (Tokyo) 0.2 1.0 Vacancy ratio (RHA) 2012 (Jul-Sep) 2012 (Apr-Jun) 2012 (Jan-Mar) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 0.0 Apr-2005 Apr-2006 Apr-2007 Apr-2008 Apr-2009 Apr-2010 Apr-2011 Oct-2005 Oct-2006 Oct-2007 Oct-2008 Oct-2009 Oct-2010 Oct-2011 (FY)Source: Compiled by MHCB Industry Research Division Source: Compiled by MHCB Industry Research Divisionbased on the Bureau of General Affairs, Tokyo based on the Ministry of Health, Labour and Welfare forMetropolitan Government the job offers-to-job seekers ratio and Miki Shoji Co., Ltd. for the vacancy rate Figure 24-11: Major office buildings to be completed in 2012 (20,000 m2 or larger) Total Floor Scheduled Building Name Location Area Completion Developer (㎡) Date Marunouchi, Chiyoda PF Project Office Building (Palace Hotel Rebuild Project) 68,000 Jan-12 Palace Hotel Ward Marunouchi, Chiyoda Marunouchi Eiraku Building (Marunouchi 1-4 project) 139,728 Jan-12 Mitsubishi Estate, Mitsubishi Tokyo UFJ Bank, Sumitomo Trust, Mitsubishi UFJ Trust) Ward Motoakasaka, Minato Akasaka K TOWER (Motoakasaka K Project) 53,702 Jan-12 Kajima Corporation Ward Kandasurugadai, Mitsui Sumitomo Insurance New Building 64,800 Feb-12 Mitsui Sumitomo Insurance Company, Limited Chiyoda Ward TEPCO Toyosu District Planning (A1 Block) Toyosu, Koto Ward 72,000 Mar-12 Harumi 2-chome Development Specific Purpose Company (Mitsubishi Estate, Kajima Harumi Front Tower (Harumi 2-chome City Planning for 2nd-4th Blocks) Harumi, Chuo Ward 43,493 Mar-12 Corporation) Aomi Q Specific Purpose Company (Mitsui Fudosan, Daiwa House, The Sankei Building, DiverCity Tokyo Aomi, Koto Ward 64,880 Mar-12 Fuji Television Network) Shibuya, Shibuya Council for Promotion of the Shibuya New Cultural District Development Project (Tokyu Shibuya Hikarie 50,000 Apr-12 Ward Corporation, Tokyo Metro, Toho Real Estate, etc.) Sumitomo Real Estate Shibuya Garden Tower (Nanpeidaicho project/Former Nanpeidaicho, 59,375 Apr-12 Sumitomo Realty & Development Site of NCR Japan Head Office Building, etc.) Shibuya Ward Shinjuku, Shinjuku Shinjuku 6-chome Specific Purpose Company (Mitsubishi Estate, Nippon Tochi-Tatemono, Shinjuku East Side Square 148,700 Apr-12 Ward Daiwa House, Heiwa Real Estate, etc.) Marunouchi, Chiyoda JP Tower (Tokyo Central Post Office Rebuilding) 212,131 Apr-12 Japan Post Holdings Ward 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) Oshiage, Sumida Tokyo Skytree East Tower 25,300 May-12 Tobu Railway, etc. Ward Kyobashi 2-chome 16 District, A Building (Shimizu Corporation New Office Kyobashi, Chiyoda 51,800 May-12 Shimizu Corporation Building) Ward Mita Bellju Building Mita, Minato Ward 55,811 May-12 Bellju Yoyogi, Shibuya JR Minami Shinjuku Building 36,000 Jun-12 East Japan Railway Company Ward Kyobashi, Chiyoda Rebuild of Dai-ichi Life Insurance Sogo-building 23,811 Jun-12 The Dai-ichi Life Insurance Company Ward Roppongi and Redevelopment of Toranomon/Roppongi District, Complex Building Toranomon, Minato 143,720 Jun-12 Redevelopment Association (Mori building, etc.) Ward Otemachi, Chiyoda Urban Renaissance Agency, NTT Urban Development, Mitsubishi Estate, The Sankei Otemachi District Second Redevelopment, A Building 110,000 Sep-12 Ward Building, etc. Otemachi, Chiyoda Otemachi District Second Redevelopment, B Building 132,500 Sep-12 Urban Renaissance Agency, Mitsubishi Estate Ward Motoakasaka, Minato Shinakasaka Center Building 39,803 Sep-12 Kanden-fudosan Ward Meguro, Meguro Meguro 1-chome Project 22,800 Sep-12 Shimizu Corporation Ward Meiji-Yasuda Life Insurance New Toyo Building Toyo, Koto Ward 96,000 Nov-12 Meiji Yasuda Life Insurance Company Shibaura, Minato Rebuilding of Yanase Head Office 23,979 Nov-12 Ward Kanda Manseibashi Building Project (Former Site of Transportation Museum, Kandasudacho, 28,499 Dec-12 East Japan Railway Company etc.) Chiyoda Ward Source: Compiled by MHCB Industry Research Division based on Mori Building Co., “Urban Renewal and Environmental Infrastructure,” Mizuho Securities Co, “Mizuho Securities Real Estate Market Report,” etc. 6 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) 3. The Housing Market (Nationwide) Housing starts In FY2011, the percentage of housing starts accounted for by the three rose by 2.4% earthquake-struck prefectures in the Tohoku region (Iwate, Miyagi and y-o-y in FY2011 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). Housing starts Certain regions are expected to see housing starts increasing in FY2012 due to expected to support for house building in areas hit by the earthquake. Conditions on the increase slightly whole though will be bearish due to economic stagnation as y-o-y in FY2012 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 24-12: Changes in new housing starts Figure 24-13: Changes in growth and contribution by use (half year) (10,000 units) (万戸) (%)140 (%) 1 2 8 .5 1 3 4 .1 1 2 4 .9 12 1 1 9 .3 5.6 10 13.6 1 2 2 .6 1 2 1 .3 1 1 7 .4 13.8 2.4 6.0 8.9120 1 1 8 .0 4.7 0.4 8 6.2 6.1 4.012.6 1 1 7 .3 1 1 4 .6 2.5 1.7 0.3 0.9 4.2 3.5 3.8 11.8 11.9 13.8 2.9 0 2.6 1.9 11.3 12.9 -2.4 13.9 1 0 3 .9 4 0.7 21.1 -1.1 5.1 11.6 1 0 3 .5100 16.6 19.2 -3.3 23.1 24.2 10.7 0 21.8 12.1 -12.1 22.3 20.2 20.7 -10 19.8 8 3 .8 8 4 .2 -4 7 7 .5 8 1 .9 16.0 16.5 80 -3.2 -3.4 -2.5 -17.7 11.8 12.0 -2.2 11.3 -20 -8 -8.8 51.6 -19.4 9.5 44.4 42.6 41.8 51.8 53.8 6.7 9.8 11.9 12.2 -12 60 44.2 45.5 45.9 46.7 -25.4 -30 -14.6 43.1 44.5 -16 31.1 29.2 28.5 27.3   -19.7 -19.1 40 -20 -40 Owner-occupied houses -24 45.1 43.8 47.6 43.8 Houses for rent 20 37.7 36.6 37.3 36.7 35.3 35.6 31.1 -50 -28 Houses for sale-Detached houses, etc. 31.2 28.7 30.9 30.6 31.7 -32 Houses for sale-Condominiums T otal -33.9 0 -60 -36 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012e (FY) -40 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 houses House for rent Houses for sale-Condominiumes Houses for sale-Detached houses, etc. Year-on-year (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 7 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) Figure 24-14: Housing starts in Japan by use 【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 No. of housing starts (1,000) 819.0 838.4 842.0 407.9 411.1 432.8 405.6 433.4 408.6 Floor Area Area (million ㎡) 73.9 76.2 76.7 37.1 36.7 39.5 36.7 40.0 37.4 No. of units Owner-occupied houses (1,000) 308.5 306.1 317.2 159.3 149.2 162.4 143.7 167.2 150.0 No. of units Houses for rent (1,000) 291.8 284.5 273.1 146.3 145.6 147.2 137.3 140.0 133.1 No. of units Houses for sale (1,000) 212.1 237.7 242.2 98.8 113.3 118.8 118.9 121.2 121.0 No. of units Detached houses, etc. (1,000) 114.1 118.3 120.4 56.3 57.8 59.5 58.8 60.7 59.7 No. of units Collective housing (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) No. of housing starts (%) + 5.6% + 2.4% + 0.4% + 6.2% + 5.1% + 6.1% - 1.3% + 0.1% + 0.7% Floor Area (%) + 9.0% + 3.1% + 0.7% + 9.5% + 8.6% + 6.3% - 0.1% + 1.3% + 1.9% Owner-occupied houses (%) + 7.6% - 0.8% + 3.9% + 7.4% + 7.6% + 2.0% - 3.7% + 2.9% + 4.4% Houses for rent (%) - 6.3% - 2.5% - 4.0% - 3.7% - 8.8% + 0.6% - 5.7% - 4.9% - 3.1% Houses for sale (%) + 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% 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 Starts for owner-occupied houses in FY2011 are expected to fall 0.8% by 0.8% y-o-y in compared to FY2010. FY2011 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). Starts expected FY2012 is expected to see the commencement of house building in areas hit to climb 3.9% by the earthquake (especially the Tohoku region) on the back of y-o-y in FY2012 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). 8 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) 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 【Owner-occupied houses】 【Houses for rent】 14.0% Rate of increase/decrease FY2009-FY2010 20.0% Rate of increase/decrease FY2009-FY2010 12.0% Rate of increase/decrease FY2010-FY2011(Apr-Nov) 10.1% 10.2% 14.2% 15.0% Rate of increase/decrease FY2010-FY2011(Apr- 9.4% 10.0% Nov) 8.2% 7.3% 10.0% 7.6% 8.4% 8.0% 6.8% 5.8% 5.7% 5.0% 5.4% 3.7% 6.0% 5.0% 4.5% 2.1% 1.7% 0.2% 4.0% 0.0% 2.0% 1.7% -1.2% -1.8% -0.8% -0.5% 2.0% -5.0% -4.9% -4.3% 0.0% -0.4% -10.0% -8.3% -2.0% -1.4% -2.1% -11.1% -4.0% -3.0% -3.3% -15.0% -3.4% -16.5% -16.1% -6.0% -20.0% Kinki region Hokkaido/Tohoku Shikoku Hokkaido/Tohoku Kinki region Metropolitan area Chubu region Chugoku (Tokyo) Shikoku Metropolitan area (Osaka) Chubu region Chugoku (Tokyo) (Osaka) Kyushu Kyushu 【Houses for sale】 70.0% 65.7% Source: Compiled by MHCB Industry Rate of increase/decrease FY2009-FY2010 Rate of increase/decrease FY2010-FY2011(Apr- Research Division based on the 60.0% Nov) 56.2% Construction Research Institute, “Monthly 50.0% Statistics of Residential Construction 43.0% 40.0% 37.1% 34.7% 28.0% 30.0% 23.6% 20.0% 19.8% 20.0% 14.5% 13.3% 10.7% 10.6% 10.0% 6.6% 5.2% 2.6% 1.9% 0.6% Figure 24-17: Financial institution lending attitudes 0.0% Chubu region Kinki region Chugoku Shikoku (Osaka) Hokkaido/Tohoku Kyushu (Tokyo) Metropolitan area DI("Accommodative" 35.0 versus "Severe") 30.0 Real estate (Large) Accommodative 25.0 20.0 15.0 Figure 24-16: Nationwide housing starts and the share of housing 10.0 Manufacturing (All) 5.0 starts from the three prefectures of the Tohoku region 0.0 (Unit) -5.07.00% 35,000 -10.0 Nationwide Three Tohoku prefectures to nationwide ratio -15.06.50% 30,000 -20.0 Real estate (Small- to medium sized)) Severe6.00% -25.0 25,000 -30.05.50% Real estate (M id-tier) 20,000 -35.0 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12 10-12 00.1-3 01.1-3 02.1-3 03.1-3 04.1-3 05.1-3 06.1-3 07.1-3 08.1-3 09.1-3 10.1-3 11.1-3 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-9 4-6 7-95.00% 15,0004.50% 10,0004.00% Source: Compiled by MHCB Industry Research Division based3.50% 5,000 on the Bank of Japan, “Short-Term Economic Survey of3.00% 0 Principal Enterprises in Japan” (Tankan Survey). 08/01 08/04 08/07 08/10 09/01 09/04 09/07 09/10 10/01 10/04 10/07 10/10 11/01 11/04 11/07 11/10 Note: (Large enterprises) Capital – over 1 billion yen (Mid-tier enterprises) Capital – more than 100 million yen/less Source: Compiled by MHCB Industry Research Division based on than one billion yen the Ministry of Land, Infrastructure, Transport and Tourism (Small- to Medium-sized enterprises) Capital – more than 20 million yen/less than 100 million yen 9 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing)(Houses for rent) Starts dropped In FY2011, starts for houses for rent continued to slide overall nationwide by 2.5% y-o-y in (Figures 24-14 and 24-15), falling 2.5% on FY2010 due to: a strong awareness FY2011 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). Starts are Despite signs of an improvement in the harsh borrowing environment that has forecast to fall assailed the real-estate market up until now (Figure 24-17), the recent economic 4.0% y-o-y in FY2012 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)Starts rose In FY2011, starts for collective housing for sale are expected to rise 21.9%significantly by year-on-year, the largest margin of increase among all types of usage (Figure21.9% y-o-y in 24-14).FY2011 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).Starts are FY2012 is also expected to see vigorous purchases, though the sharp pace ofexpected to the rise will slow down due to developer concerns about ballooning inventories,increase slightly so new starts are expected to increase slightly by 2.0% year-on-year (Figureby 2.0% y-o-y in 24-14).FY2012(Houses for sale – Detached houses)Starts rose Though condominium developers limited their activities to areas with solidsignificantly by demand in FY2011, power builders used low prices to pursue an aggressive3.6% y-o-y in sales strategy in areas not in direct competition with these condominiumFY2011 developers. As a result, starts are expected to increase by 3.6% on FY2010 (Figure 24-14).Starts are In FY2012, though homebuilders with liquidity are expected to remain active,expected to given the uncertainty surrounding the economy at present, home buyers areincrease slightly starting to adopt a wait-and see approach, just like in other housing sectors. Asby 1.8% y-o-y in a result, the buoyant market for detached homes for sale may see a slower paceFY2012 of growth. The market is also reaching a peak in terms of volume too, so 10 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) 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, supply In 2011, the supply of new condominiums in the metropolitan area (Tokyo and moved flatly on three surrounding prefectures) moved flatly on the previous year at 44,000 units. the previous year This signaled a recovery after several years of stagnation (Figure 24-18). The at 44,000 units 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). Figure 24-18: Changes in the supply of condominiums in Figure 24-19: Changes in the cumulative supply of the metropolitan area condominiums in the metropolitan area (10,000 units) 10 (10,000 units) 9.6 8.9 8.9 9 8.5 9 8.6 8.5 8.3 8.3 8.5 8.4 8.4 8 8.0 8 2004 7.4 7.1 2005 7 7 7.4 6.6 2006 6.1 6 2007 6 2008 5.1 6.1 5 4.5 4.5 4.4 2009 4.4 3.6 5 2010 4.5 4 2011 3 4 4.4 3.6 2 3.9 3 3.1 3.5 3.2 3.2 3.6 3.1 2.6 2.3 2.2 2.4 1 2.0 2.3 1.7 1.6 1.6 2.0 1.9 0.8 2 0 1 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (FY) Kanagawa, Chiba, Saitama prefectures 0 Tokyo (other than 23 wards) Jan Feb M ar Apr M ar Jun Jul Aug Sep Oct Nov Dec Tokyo (23 wards) Source: Compiled by MHCB Industry ResearchSource: Compiled by MHCB Industry Research Division from Haseko Division based on Real Estate Economic Institute Co.,Research Institute Inc., “CRI,” and Real Estate Economic Institute Co., “Monthly Real Estate Economic Survey Report”“National Condominium Market Trends”Note: Figures for FY2012 are based on MHCB Industry ResearchDivision forecasts 11 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) Supply is Tokyo’s 23 wards continue to retain a high share of the condominium market recovering, supply in the metropolitan area (Figure 24-20). This suggests that supply is particularly in concentrating on areas where comparatively strong demand can be expected. areas with strong demand Under these circumstances, Chiba Prefecture’s share of supply has fallen further since the earthquake (Figure 24-21) and conditions remain comparatively tough. Figure 24-21: Comparison of the cumulative supplyFigure 24-20: Changes in the share of supply in the of condominiums in the metropolitan area by areametropolitan area by area 0 2,000 4,000 6,000 8,000 10,000 (Unit)65% Supply share (Tokyo/Metropolitan area) Supply share (Saitama/Metropolitan area) 23 wards (Yamanote area) 56.4% Supply share (Chiba/Metropolitan area) 53.2%55% Supply share (Kanagawa/Metropolitan area) 23 wards (Shitamachi area)45% 39.8% Other parts of Tokyo35% 25.8% Kanagawa pref.25% 21.2% 13.2%15% Saitama pref. 2010 (Jan-Nov) 7.8% 2011(Jan-Nov)5% Chiba pref. 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (FY) Source: Compiled by MHCB Industry Research Division based on Real Estate Economic Institute Co., “Monthly Source: Compiled by MHCB Industry Research Division based Real Estate Economic Survey Report” on Haseko Research Institute Inc., “CRI,” Selling prices The data reveals that average selling prices in the metropolitan areas grew in will continue to 2010, particularly in areas with comparatively high selling prices, though prices be determined are falling at present due to the slight decentralization of selling areas entering by buyer 2011 (Figure 24-22). As symbolized by the 30% year-on-year fall in the number sentiments of sales of luxury apartments (the so-called ‘okushon,’ or 100-million-yen apartments), selling prices will continue to be determined by buyer sentiments. Condominium The contract ratio in the first month remained at elevated levels, with the latest demand remains three-month moving average as of December 2011 at 76.4%, better than the buoyant 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. 12 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) 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]Selling price per unit (10,000 yen) (JPY 10,000 y en) 4,900 2010 6,500 2011 JPY47.16 millions Tokyos 23 wards 2008 JPY45.78 71.0㎡ Suburban Tokyo 4,800 JPY47.75 millions 6,000 Kanagawa pref. millions 73.5㎡ 2007 Chiba pref. 4,700 JPY46.44 Saitama pref. 5,500 5,339 millions 4,600 75 6 ㎡ 2006 5,000 4,665 4,500 JPY42.00 millions 4,400 75.7 ㎡ 4,500 4,389 2009 2003 4,159 4,300 JPY45.35 JPY40.69 millio ns 4,182 4,152 millions 74.7 ㎡ 4,000 2005 3,751 4,200 70.6 ㎡ 3,575 JPY41.08 2004 3,679 millions 3,500 4,100 1999 3,559 2000 2001 4,000 2002 3,000 3,900 2,500 68 70 72 74 76 78 80 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (FY) Average area per unit ( ㎡) Source: Compiled by MHCB Industry Research Division based on Haseko Research Institute Inc., “CRI,” Figure 24-23: Changes in the first-month contract rate for condominiums and inventories in the metropolitan area (Unit) 14,000 90% 86.3% 12,427 11,611 12,000 85% 10,000 80% 76.4% 8,000 75% 72.0% 6,166 6,000 70% 4,000 4,666 4,575 65% 2,000 60% 57.4% 0 55% 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 Inventories (LHA) First-month contract rate (3-month moving average, RHA) Source: Compiled by MHCB Industry Research Division based on Real Estate Economic Institute Co. 13 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) 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” [3 adjacent prefectures [Total for the metropolitan area] [Tokyo] (Chiba, Saitama, Kanagawa)] (10,000 units) (10,000 units) (10,000 units) 7.0 4.0 3.0 08/1 08/1 08/1 6.0 3.5 2.5 07/1 Difference between units starts and uni Difference between units starts and uni Difference between units starts and uni 07/1 3.0 05/1 07/1 5.0 2.0 04/1 09/1 05/1 2.5 09/1 06/1 10/1 per on the market 4.0 1.5 per on the market per on the market 06/1 99/1 06/1 10/1 09/1 2.0 3.0 99/1 1.0 03/1 04/1 99/1 03/1 1.5 10/1 02/1 04/1 02/1 11/11 11/11 2.0 11/11 03/1 0.5 02/ 1.0 05/1 01/1 1.0 01/1 0.0 01/1 0.5 00/1 00/1 0.0 -0.5 0.0 00/1 11/1 11/1 11/1 -1.0 -0.5 -1.0 3.0 5.0 7.0 9.0 11.0 13.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 (10,000 units) (10,000 units) (10,000 units) Number of units started Number of units started Number of units startedSource: Compiled by MHCB Industry Research Division based on the Construction Research Institute, “MonthlyStatistics of Residential Construction Starts” and Real Estate Economic Institute Co., “National Condominium MarketTrends”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 ofmonthly starts” minus “12-month cumulative total of monthly supply” (assuming that the supply begins 6 months afterstarts)Figure for November 2011 is the total of 10 months. At the same time, the data for ‘hidden inventories (the difference between the ‘Hidden number of condominium starts and the number of condominiums counted as on inventories’ are the market)’ reveals an increase across the Tokyo metropolis and the three on the increase 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, 51,000 units with hearty selling appetite expected. Conditions remain favorable to house expected for buyers due to the continuation of systems such as the eco-point program for 2012 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). 14 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing)II. CORPORATE EARNINGS1. 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 3,898.0 Operating 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 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: Mitsui Fudosan Co., Ltd., Mitsubishi Estate Co., Ltd., Sumitomo Realty & Development Co., Ltd., Tokyu Land Corp. and Tokyo Tatemono Co., Ltd. FY2011 will see Despite the limited impact of the Great East Japan Earthquake, the combined falling income FY2011 financial results of the five major real estate companies saw leasing and profits 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 A slight recovery is expected in in favorable locations/high-spec buildings supplied by the five major real estate FY2012 companies will move firmly on the whole, including those with tenants. However, given the forecast for office building market conditions in FY2012, it 15 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) 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) Figure 24-26: Performance of 5 major home builders 【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 4,010.5 Operating 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% 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. Rising profits The FY2011 financial results of the five major homebuilders reveal that each and income are company remains bullish on the back of low interest rates and government expected for stimulus programs such as the eco-point program for houses, with the FY2011 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). 16 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) Rising income FY2012 will see rising demand related to the reconstruction efforts, particularly and profits in the Tohoku region, while the detached home sector is also expected to move expected for firmly, centered on the core built-to-order housing sector. The condominium for FY2012 sale sector will also contribute to profitability through the completion of orders placed when purchases picked up again in earnest from FY2010 onwards. 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 realestate/housing industry Housing market In the ‘Mizuho Japan Industry Outlook Vol.36’ (released August 19, 2011), we needs have pointed out the changing needs of office building tenants in the aftermath of the changed in the wake of the Great East Japan Earthquake (growing focus on earthquake resistance, disaster Great East preparedness structures and environmental considerations), but changes in Japan consumer sentiments can also be observed in the housing sector. Earthquake 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. 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 Reform demand related to earthquake resistance or environmental purposes is starts market is expected to grow. Developers and homebuilders in the existing homes sector in danger of have been slow to react though, in contrast to their initiatives in the new shrinking 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. 17 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) At the same time, the government is clearly placing great importance onGovernmentpolicy has shifted housing stock. June 2009 saw the start of the ‘approved excellent long-termfrom a flow housing system’ as part of the policy shift from the flow consumption model tomodel to a stock the stock model, as mandated in the Basic Act for Housing (implemented inmodel 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.The utilization of The utilization of existing housing stock would bring a number of benefits. Forexisting homes a start, it would increase the opportunities for young, first-time buyers towould bring purchase a home. By trading existing homes at reasonable and appropriatemany benefits 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.Industry top There are three factors blocking the utilization of existing housing stock,players need to namely (1) asymmetrical information, (2) the preference of sellers for newlaunch their ownindependent housing sales and (3) the lack of financial instruments that deal with existinginitiatives 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. 18 Mizuho Corporate Bank, Industry Research Division
    • FY2012 Japan Industry Outlook (Real Estate & Housing) Takafumi Shukuri takafumi.shukuri@mizuho-cb.co.jp Land, Infrastructure & Transport Team Industry Research Division Mizuho Corporate Bank, Ltd19 Mizuho Corporate Bank, Industry Research Division