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Opportunity and Challenge Changing Housing Market in Japan January / February, 3003 Kuraishi Fumiaki Advisor in charge of the Asia Builders’ Week Japan Management Association (JMA) Former General Manager of JETRO Housing Materials Center (Osaka) Outline ( Outlines )

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Opportunity and Challenge Changing Housing Market in Japan

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Opportunity and ChallengeChanging Housing Market in Japan

January / February, 3003

Kuraishi Fumiaki

Advisor in charge of the Asia Builders’ Week

Japan Management Association (JMA)

Former General Manager of JETRO Housing Materials Center (Osaka)


Outline

( Outlines )

1. Still the Second Largest Housing Market

2. Characteristics of Japanese Housing Market

3. Regulatory Changes in Recent Years

4. Steady Growth of Imported House

5. Imported Building Materials

6. Changing Attitude of Consumers and Home Builders

7. Potentials: Renovation, Home Centers, Resort Homes


The Second Largest Housing Market

Source: National Countries (OECD) Account of OECD


Housing Situation in Japan and US

Source:US Census Bureau(2000), Survey of Housing Loan (fiscal year 2000) by Government Housing Loan Corporation


New Housing Market


Reasons of Decline of New Home Market

1. No Growth of Population ( Numbers of Family)

2. Enough Numbers of Homes (50.3million homes for

43.9 million families): But Quality, not Enough

3. Depressed Economy

Source: Census of Housing and Land( latest 1998)

by Ministry of Construction


Difficult Time for Home Builders

Giant Home Builders (Prefab Home)

Ex. Sekisui House(60,996 units /year )

Daiwa House Industry (34,695 / year)

Misawa Home ( about 30,000/year)

Medium to Large Home Builders(1,000~5,000/year)

Medium size Home Builders (100~1,000/year)

Small & Medium Home Builders (less than 100/year)

Most of 130,000 Small builders ( built 5~10/year)


Competitive Market Force Big Companies to go Merger and Acquisition, Joint Ventures and Collaborations

Ex.

TOSTEM and INAX

set up a common holding company

TOTO and MATSUSHI DENKO

started business collaborations

MISAWA HOME and PAINT HOUSE,

joint remodeling business


Construction of Condos (Mansions ) boomed in the past 3 Years

166 192 218 223 (1,000 Units)


Low Cost Housing

  • Low cost houses are getting popular initiated by

  • ”Limited 25”of Misawa Home in 2001

  • 500,000 Yen / tubo( 3.3 ㎡)→250,000 Yen / tubo

  • 2. Followed by other medium size home builders and

  • franchise home builders

  • 3. With stagnant economy, Japanese consumers can not endure high amount of home loan (used to be 4 or 5 times of their annual income).


Characteristics of Japanese Housing

  • Shorter Life

  • Price is too High

  • Quality, such as Energy Efficiency is not high

  • Resale Value of Home declines to almost Zero in 20 years


Characteristics : Shorter Life

Source: White Paper of Construction 1996 (Ministry Of Construction)


Characteristics (Japan)

First Generation

Second Generation

Third Generation


Characteristics (Western Europe)

First Generation

Second Generation

Third Generation


Regulatory Changes in Recent Years

Next Generation Energy Conservation Standard (1999)

Revision of Building Standard Law(2000)

Housing Quality Assurance Law (2000)


Next Generation Energy Saving Standard (1999)

  • Stricter Energy Saving Standard closer to the R-2000 Standard of Canada, which was introduced in 1982

  • Enhancing the importance of insulation and air tightness

  • Positively affected to Imported Houses and Building Materials


Revision of Building Standard Law(2000)

  • Shift from Prescriptive( Specification) Code to Performance Building Code

  • Interim and Final Building Inspection

  • Setting Up of Private Building Inspection Bodies

  • NOTE: Enforcement Order of the BSL(Relating to Indoor Air Quality) will be enforced in July 2003


Housing Quality Assurance Law (2000)

10-year Warranty on Defects on Principal Structures

Housing Performance Indication System

Nine Performance Indicators (Entirely Voluntary)

Establishment of Housing Dispute Resolution Bodies


Nine Performance Indicators

Structural Stability

Fire Safety

Minimizing Building Deterioration

Easy Performance of Building Maintenance

Thermal Emvironment

Indoor Air Quality

Light and Visibility

Noise Control

Accessibility to the Elderly or the Disabled


Steady Growth of Imported House


The First Imported House in KobeImported from Portland Oregon in 1925


Origin of Imported House(2000 F. Year)

Source: Imported House Survey by METI, MLIT, JETRO, Japan 2x4 Builders Association and Imported House Industry Organization in 2002


Seattle Vancouver Village in Kobe


Seattle Vancouver Village in Kobe


Sweden Hills in Hokkaido


Imported Houses in a Small Lot


88%of Imported house, 2x4 or other Panel Structure


Imported Houses are Cheaper

0,000 yen/ tubo( 3.3 ㎡)


Imports of Housing Materials 99~02 (million yen)

1999 2001 01/99

Prefabricated Building (Package House) 19,299 23,108 20%

Solid Wood Flooring 15,023 17,599 17%

Wood Windows & Frames 6,108 5,622 -8%

Wood Doors & Frames 11,711 12,226 4%

Structural Laminated Lumber 15,104 25,113 66%

Plastic Windows & Doors 3,076 3,402 11%

Glazed Ceramic Tiles 2,906 4,328 49%

Lumps & Lighting Fittings 30,103 43,814 46%

Source: Japanese Trade Statistics


Positive Trend of Japanese Housing Market

Changing Consumers

Half of Home owners are not Satisfied

More information (mass media and internet)

Awareness of quality of housing( more

information)

Durability

Design

Healthy house

Energy efficiency

Barrier free

Cost consciousness


47.5% of Families are not Satisfied with their Home

Source:Housing Demand Survey by Ministry of Construction(1998)


Positive Trend of Japanese Housing Market

Changing Attitude of Homebuilders

Crisis of losing business in the future

Changing attitude toward imported

building materials

Looking for New Building Products and

Technologies

Cost consciousness


Survey of Home Builders

Imported Housing Materials also used

for Post & Beam House s and Remodeling

Users Survey of Imported Housing Materials 1999

by JETRO Housing Materials Center Osaka(JHMCO)


Client’s (Consumers) Demand is More Important

Question: What made you use imported materials for the fist time ?

Users Survey of Imported Housing Materials by JHMCO


Design, Function & Price are Important

Question: Why did you choose imported materials?

Users Survey of Imported Housing Materials by JHMCO


Problems of Using Imported Housing Materials

Delivery Time 57

Quality of Materials 31

Maintenance 29

Inaccuracy 29

Treatment of Defects 27

Response to Complaint 21

Standard and Regulation 18

Installation 14

Small or No Stock in Japan 7

Lack of Knowledge 7

Question: Please specify problems of using imported materials ?

Users Survey of Imported Housing Materials by JHMCO


Survey of Home Builders

Question: Are you going to use imported materials again?

Users Survey of Imported Housing Materials by JHMCO


Interested Items by Visitors to Japan Home Show 2002


Interested Items at JHMCO 2002 ( Consumers and Business )


Popular Items In JERTO Housing Materials Center(Osaka)


Canadian Hardwood Flooring


SwedishVentilation System


American Wooden Windows and Doors


Italian Tiles


Swedish Triple Grazed Wood Windows & Doors


Home Improvement and Renovation Market to Grow

( 7.3 8.0 8.7 9.3 )

Source: Ministry of LIT( Construction)


Ratio of Home Renovation to Housing Investment is much Smaller in Japan

( 40.9% 44.7% 55.0% 65.1% 10.9% )

Source: Ministry of Land, Infrastructure and Transport


Renovation Market is Expected to Grow

Renovation Market

Opportunities for Imported Housing Materials

(Lesser extent of Regulatory Restriction )

Consumers’ Preference can be easily Reflected

(Fear of Potential Large Scale Earthquakes in Kanato, Tokai

and Nankai area)


48% of Wood Structured Detached 2F Houses , judged Very Dangerous at time of Large Earthquake

Percentage of Dangerous Wood Structured 2F Houses

Houses built before 1980 82%

Houses built after 1981(Revised BSL) 33%

66% of People said They can not Spend more than 1 million yen

(about US$ 9000) for Renovation of these Dangerous Houses

Research was concluded in June 2002 by Japan House Renovation

for Earthquake Organization. 45,000 houses( Average 31 years old)


Home Center to Play an Important Roles in Home Improving Market

More numbers of Aged Consumers to

have more Free Time

DIY for Enjoyment and Money Saving

Home Renovation may be done by Home Owners

Small Home Builders started to use

Home Centers more


Home Centers handle More Housing Materials than 5 years ago


Consumer's Preference of Next Home

Survey of Consumer’s Preference of Next Home 2002 by

“Gekkan Housing “ (Housing Monthly) of Recruit Co.


Summary

1.New Housing Starts, No Growth

2. Imported Houses will Steadily Increase

3. Imported Housing Materials continue to be Used in Japan

4. Competition in Building Materials will be intensified (China ?)

5. Renovation Market and Condos (Mansions) will be a Factor

6. Quality of Multi Family Housing in Japan is still very Low

7. Changing Attitude of Consumers and Home Builders

8. Home Center may be playing an important role


Summary

  • Important KEY Words for Marketing in Japan

  • Sustainable and durable Housing( For Three Generations)

  • Energy Saving and Environmentally Friendly Homes

  • Healthy Housing

  • Barrier Free Housing ( for the Elderly and Disabled)

  • Safe Housing ( Structural Strength against Earthquake)

  • Safe Homes ( Protection of Robberies and Pickings)


Some Suggestions

  • More Value Added Housing and Building materials

  • (Promotion of Design, Function, Performance, Technology,

  • Science of Home Building, Experience of Elder Care Home)

  • More Education for Consumers is Important

  • More Publicity toward Consumers and Small Builders

  • Finding Good Partners (Person) is Important

  • Continuous Presence in Japan is very Important

  • (Visiting Japan and Communicating with Your Clients and Exhibiting in Japan Home Show Etc.)

Thank you very much for your attention


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