On September 6th, the Tokyo Metropolitan Government announced new housing starts data for July, 2023.
Key Takeaways:
Tokyo reported a 1.3% decrease in new housing construction in July 2023, marking a second consecutive monthly decline.
Owner-occupied homes declined for 18 months (11.9% decrease), while rentals grew by 5.4%, and condominiums fell by 7.0%.
Tokyo's central three districts saw a significant 232.0% increase, while the central ten districts and overall districts experienced declines.
The number of new housing constructions amounted to 10,603 units, marking a decrease for the second consecutive month with a 1.3% decline compared to the same month (otherwise known as year-on-year, or YoY)
Looking at the data based on usage type, owner-occupied homes extended their decline to 18 months straight, with 1,182 units (a decrease of 11.9% YoY compared to the same month the previous year).
Rental properties, on the other hand, experienced a 5.4% increase YoY, reaching 5,807 units, and marking a five-month streak of growth.
Subdivided properties (including both condos and off-plan single family homes), dropped by 7.0% for the second consecutive month, accounting for 3,600 units.
Within these subdivided properties, strata-title condo starts decreased by 17.7% with 1,885 units, marking a two-month decline, while subdivided single-family home starts increased by 10.7%, reaching 1,704 units, extending to a four-month growth trend.
In terms of geographical areas, the central three wards of Tokyo (Chiyoda, Chuo and Minato) experienced a significant increase of 232.0%, totaling 571 units, marking the third consecutive month of growth.
However, the central ten wards witnessed a 0.8% decrease, totaling 2,108 units, after four months of continuous growth.
The central ten wards include the central three plus Shinjuku, Bunkyo, Taito, Sumida, Koto, Shibuya and Toshima.
Across the 23 wards as a whole, there was a 7.5% decline YoY to 8,222 units, marking a second straight month of declines.
Tokyo non-23 ward cities also saw a drop, with 2,336 units, reflecting a 23.9% YoY decrease for the second consecutive month.
Why are Housing Starts so Important?
Housing starts are a barometer of the overall health of an economy; if starts rise then it means developers and their bankers are confident enough to build houses or condos and assume there will be buyers to purchase at the other end of the process.
Alternatively if housing starts show a decline, it is usually interpreted as the opposite. In this case, the banks will be hesitant to lend to developers, throttling their ability to start construction projects and would rather wait until circumstances are better.
This particular metric is important because construction can take a year or more meaning decisions made now on whether to commit to building and whether the minimum sell price estimates for the finished units look achievable is reflective of the short to mid term economic sentiment.
Also, housing starts are indicative of commodity and labour demand as they pertain to homebuilding.
Source:
July 2023 Tokyo Prefecture New Housing Starts Excel Data (September, 2023; Japanese only)
