The knock on effect of the US sub prime mortgage crisis seems to be having an effect on Japan’s housing market.
Japan’s Ministry of Land, Infrastructure and Transport, released a report last week, stating that the seasonally adjusted annualized housing starts have been pushed down to a record-low of 720,000. Housing starts have shown steep year-on-year declines each month, with a 23.4 per cent drop in July followed by a 43.3 per cent plunge in August. Construction starts for owner-occupied homes dropped 21.6 per cent, while those for rental homes tumbled 51.3 per cent. Building starts for homes for sale fell 55.6 per cent, with condominiums falling 74.8 per cent.
In the third-quarter GDP estimates they had released by Wednesday, eight private-sector economic research institutes saw an average 9 per cent decline in housing investment, the largest drop since the 11.1 per cent slide in the April-June quarter of 1997, when the consumption tax was raised. A 9 per cent decrease in housing investment translates into a 0.3 per cent drop in quarterly GDP. “Construction investment cannot be ignored because it accounts for roughly a quarter of capital investment,” an analyst at NLI Research Institute said.
Many pundits are putting the bleak housing figures down to the sub-prime mortgage problem in the U.S, but there were a few positive comments coming from the Land and Industry Minister, Tetsuzo Fuyushiba, who said, “housing starts will head toward a recovery in one or two months.”
But some within the industry, including an official at the Japan Association of Architectural Firms, do not agree or expect a recovery this year. We are leaning this way also, because the US’s problems have a long way to go before reaching rock-bottom; the Japanese market is only just beginning to feel the effects.