Opportunity and Challenge Changing Housing Market in Japan

1
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)

2
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
3
The Second Largest Housing Market
Source National Countries (OECD) Account of OECD
4
Housing Situation in Japan and US
SourceUS Census Bureau(2000), Survey of Housing
Loan (fiscal year 2000) by Government Housing
Loan Corporation
5
New Housing Market
6
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
7
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(1,0005,000/year) Medium size Home
Builders (1001,000/year) Small Medium Home
Builders (less than 100/year) Most of
130,000 Small builders ( built 510/year)
8
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
9
Construction of Condos (Mansions ) boomed in the
past 3 Years
166 192 218 223 (1,000
Units)
10
Low Cost Housing

• Low cost houses are getting popular initiated by
• Limited 25of 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).

11
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

12
Characteristics Shorter Life
Source White Paper of Construction 1996
(Ministry Of Construction)
13
Characteristics (Japan)
First Generation
Second Generation
Third Generation
14
Characteristics (Western Europe)
First Generation
Second Generation
Third Generation
15
Regulatory Changes in Recent Years
Next Generation Energy Conservation Standard
(1999) Revision of Building Standard
Law(2000) Housing Quality Assurance Law (2000)
16
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

17
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

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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
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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
20
Steady Growth of Imported House
21
The First Imported House in KobeImported from
Portland Oregon in 1925
22
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
23
Seattle Vancouver Village in Kobe
24
Seattle Vancouver Village in Kobe
25
Sweden Hills in Hokkaido
26
Imported Houses in a Small Lot
27
88of Imported house, 2x4 or other Panel Structure
28
Imported Houses are Cheaper
0,000 yen/ tubo( 3.3 ?)
29
Imports of Housing Materials 9902 (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
30
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
31
47.5 of Families are not Satisfied with their
Home
SourceHousing Demand Survey by Ministry of
Construction(1998)
32
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
33
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)
34
Clients (Consumers) Demand is More Important
Question What made you use imported materials
for the fist time ? Users Survey of Imported
Housing Materials by JHMCO
35
Design, Function Price are Important
Question Why did you choose imported
materials? Users Survey of Imported Housing
Materials by JHMCO
36
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
37
Survey of Home Builders
Question Are you going to use imported
materials again? Users Survey of Imported Housing
Materials by JHMCO
38
Interested Items by Visitors to Japan Home Show
2002
39
Interested Items at JHMCO 2002 ( Consumers and
Business )
40
Popular Items In JERTO Housing Materials
Center(Osaka)
41
Canadian Hardwood Flooring
42
Swedish Ventilation System
43
American Wooden Windows and Doors
44
Italian Tiles
45
Swedish Triple Grazed Wood Windows Doors
46
Home Improvement and Renovation Market to Grow
( 7.3 8.0 8.7 9.3
)
Source Ministry of LIT( Construction)
47
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
48
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)
49
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)
50
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
51
Home Centers handle More Housing Materials than 5
years ago
52
Consumer's Preference of Next Home
Survey of Consumers Preference of Next Home
2002 by Gekkan Housing (Housing Monthly) of
Recruit Co.
53
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
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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)

55
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