(TOKYO, JAPAN) -- Japan's real estate market, like India's, is heading south despite signs of gradual improvement in some areas.
(Please see Bubble Bursts for India's Once-Booming Real Estate Market , Jan. 26, 2010)
Japan's Ministry of Land and the Japan Real Estate Institute are disclosing what most Japanese residents already know:
- Housing Starts Down 15.7%---Lowest Level Since Japan Hosted 1964 Olympics
- Average Price of Condominiums Are Down 5% in Most Metro Markets
- Residential Land Prices Fell 3.2% in 2009
- All Property Values Are Expected to Slump for a Seventh Straight Quarter
- Jobless Rate is at 5.1%---No Improvement Since April 2009
- Falling Wages Are Curbing New Home Sales
- Rising Yen Could Stall Recovery
- Consumer Prices Down for 10th Consecutive Month
The report by the Land Ministry indicates Japan will lose its place this year as the world's second-largest economy to China.
"It's been a very miserable year," Richard Jerram, chief economist, Macquarie Securities Ltd., Tokyo, told Bloomberg.
"There certainly is an improvement under way, but it's been slow to materialize, and it's starting from very low levels."
Among the improvements are industrial production which rose for the 10th straight month in December and households slowly began to increase spending.
Residents are not buying homes in the volume of past year. Only 788,410 homes broke ground in 2009, 27.8% fewer than in 2008. That figure was the lowest since 751,429 was recorded in 1964.
"More people are asking for discounts, or are looking to share rooms with others, "Wataru Ichinari, president, Ichinari Real Estate, Tokyo, told Bloomberg.
"We're not going to see a full-fledged recovery in the housing market for at least a couple of years."
Bloomberg reports Japan's policy makers are trying to revive the market. For example, former Prime Minister Taro Aso expanded and extended tax deductions on housing loans.
The current government under Prime Minister Yukio Hatoyama is offering incentives to build and renovate energy-efficient homes in a 7.2 trillion yen ($80 billion US) stimulus package passed by parliament last week.
Construction firms have been hit hard. Anabuki Construction filed for bankruptcy court protection with 140 billion yen (US $1.54 billion in debt. Anabuki became the country's sixth largest corporate failure in 2009.
(1 Japanese yen = 0.011074 U.S. dollars)
Japan Real Estate Institute data show an index of residential land prices has fallen more than 40% from its 1991 peak, Bloomberg reports.
Condominium prices are dropping in the metropolitan areas of Tokyo, Kanagawa, Saitama and Chiba.
Bank of Japan officials fear deflation and a rising yen will delay the economic recovery.
Wages have slumped for 16 straight months.
"With unemployment so high and wages dwindling, household just aren't going to be in the mood to buy a new home" for some time, Hiroshi Miyazaki, chief economist, Shinkin Management Co., Tokyo, told Bloomberg.
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