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Quake to Spur Japan Homebuilding Boom, Sekisui House Says

Sekisui House Ltd. (1928), Japan’s second- largest home builder, will focus on the local market after expanding overseas as it expects the nation’s biggest housing boom in at least 15 years after the March 11 earthquake.

Housing starts, which dipped below 1 million units in 2009 and 2010 for the first time in four decades, may rebound as homeowners rebuild after the nation’s strongest temblor, Isami Wada, chairman of the Osaka-based company, said in an interview.

“We had to expand overseas because signs of a slowdown in Japan’s housing demand were alarming,” Wada said in Tokyo. “Unexpectedly, the earthquake struck. I now anticipate annual housing demand to reach the 1 million-unit level again due to revival efforts and reconstruction demand.”

Sekisui, which expanded into markets including Australia and China in the past three years, is predicting demand will exceed that of 1996, a year after the Great Hanshin Earthquake that hit cities including Kobe, when 1.6 million new homes were built. Prime Minister Naoto Kan has proposed a 4 trillion yen extra budget that is likely to be the first of several packages to rebuild areas devastated by March’s magnitude-9 temblor and tsunami that destroyed and damaged almost 350,000 homes.

Photographer: Kimimasa Mayama/Bloomberg

Workers construct temporary housing units for survivors of the March 11 earthquake and tsunami in Minamisanriku, Miyagi prefecture, Japan. Close

Workers construct temporary housing units for survivors of the March 11 earthquake and... Read More

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Photographer: Kimimasa Mayama/Bloomberg

Workers construct temporary housing units for survivors of the March 11 earthquake and tsunami in Minamisanriku, Miyagi prefecture, Japan.

Housing starts rose for 10 months through December 1996, after the 7.3-magnitude Hanshin earthquake hit parts of western Japan on Jan. 17, 1995, according to government data. Apartments put up for sale in Osaka and its surrounding areas rose 15 percent to 44,430 units that year, according to the Real Estate Economic Research Institute.

Greater Need

Prior to the housing boom in 1996, housing starts rose for 21 months ended February 1994, according to Bloomberg data. New homes built in Japan peaked at 1.7 million in 1990, according to data from the Land Ministry.

Shares of Sekisui House, which gained as much as 1.2 percent earlier, before closing 0.7 percent lower at 766 yen as of 3 p.m. on the Tokyo Stock Exchange.

New home starts fell to 788,410 units two years ago, the lowest since 1964, and remained below 1 million last year as falling wages and mounting job losses sapped demand.

“This time, the earthquake damaged a much wider area,” said Wada, who is also chief executive officer. “The need for revival is greater than the Hanshin earthquake. With so many aftershocks, I expect more home owners will seek to rebuild.”

About 90 percent of the country’s 30.3 million homes haven’t been assessed for quake resistance, according to Japan’s Statistics Bureau.

U.S., Singapore

Sekisui had expected revenue from its overseas operations to reach as high as 200 billion yen ($2.5 billion) by January 2014. That’s about 13 percent of sales in the past year. Sekisui and bigger rival Daiwa House Industry Co. have sought revenue growth overseas because of a decline in Japan’s population and the slowing economic growth.

Sekisui entered real estate markets in Singapore and the U.S. by forming alliance with local partners after it established an overseas division in August 2008. The company is targeting higher profitability from countries with increasing population, economic growth and rich in resources, Wada said.

Japan’s extra budget and spending that may benefit the housing market is putting pressure on the government to raise taxes, a move that Wada said would hurt the economy, jeopardizing the revival plan.

“A housing boom can only take place as long as the consumption tax is left alone and the government sells more debt to boost growth,” Sekisui’s Wada said.

Only 0.4 percent of 29,692 homes built by Sekisui and located in quake-affected areas were destroyed during the Hanshin quake, while 9.3 percent of those homes were slightly damaged, according to the company’s website.

“We are in the business of protecting people’s life and assets,” said Wada. “I started to think we are also in the business of guarding people’s sense of security, providing a peace of mind by continuing building more quake-resistant homes.”

To contact the reporters on this story: Kathleen Chu in Tokyo at Kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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