Housing sales in Hokkaido continue to slow down Custom-built housing starts down 10% Rents rise due to rising rental demand

Niseko real estate News

Home sales continue to slow down in Hokkaido. The number of custom-built housing starts in the first half of the year (January to June) was 3,966, down more than 10% from the same period last year, which was a record low. The market has been sluggish for a long time due to rising materials and land prices, and the construction of ready-to-wear homes has also slowed down. The deterioration in business conditions has also spread to related industries such as the lumber industry. On the other hand, rental demand is increasing to accommodate people who are hesitant to buy a home, leading to an increase in rent levels.

“Rising costs have forced housing prices to rise, and rising prices are dampening the desire to purchase. Even if prices are lowered, the response is slow, and there is no element that will improve the situation.” An executive at a mid-sized housing manufacturer in Sapporo sighs. Since the beginning of this year, the number of orders for custom-built homes at the company has decreased by about 20% compared to the previous year. The pre-built house built last year was discounted by 4 million yen from the original price of about 50 million yen, but more than a year later, it still hasn’t sold.

According to the Ministry of Land, Infrastructure, Transport and Tourism, the number of new housing starts (including condominiums) in Hokkaido in the first half of this year was 13,838, down 1.0% from the same period last year. In addition to the 10.5% decrease in custom-built homes, the number of pre-built homes also decreased by 35.6% to 1,021 units, which was significantly lower than the previous year.

The number of custom-built housing starts in Hokkaido in 2022 will be more than 20% lower than the previous year, falling below 10,000 units for the first time in statistics. In response to the slump in custom-built housing, companies have been focusing on pre-built housing as a relatively inexpensive product, but the inventory of completed housing has ballooned, making it difficult to start new construction.

According to data compiled by Teikoku Databank Sapporo Branch, the number of bankruptcies in the construction industry in the first half of the year was 27, four times the number in the same period last year. “As the repayments of zero-zero loans begin, there are many cases where small businesses with poor management strength are stuck,” said the branch.

The slowdown in the wide-based housing industry is also having an impact on related industries. Noriyuki Takahashi, president of Showa Mokuzai (Asahikawa), a major lumber company, pointed out, “People are trying to save money, and the size of each house is getting smaller, and the amount of lumber used has decreased by more than 20%.” The “wood shock,” a global lumber shortage that has continued since around 2020, has come to an end, but the disposal of inventory purchased at high prices is putting pressure on profits, and the double whammy of a decline in demand is weighing heavily on management.

On the other hand, construction of rental housing is steady. The number of housing starts in the first half of 2023 was 7,193, an increase of 12.3% from the previous year. In 2022, the same trend as for custom-built homes continued, but the number has started to increase this year.

At Tokoguchi Atom (Sapporo), the largest rental agency in Hokkaido, although the number of rental contracts is flat compared to the same period last year, the average asking rent in July increased by 4.7% compared to the same month last year. “Rental demand is increasing due to people refraining from buying houses.Even if we set the rent a little higher, the occupancy rate is good,” said the Sales Promotion Department. Rents are expected to continue to rise, especially in newly built properties, due to soaring construction costs, and we will be closely monitoring the impact on market conditions.

Hokkaido News Papar2023.8.30

Niseko real estate company CEO’s perspective

“Rising prices of materials due to earthquake disaster reconstruction projects,” “Wood shock,” “Corona” [
Materials such as “war” continue to soar. The problem is not that the price rises temporarily, but that the amount of money that has risen does not go down. This will be added to the construction cost. Construction costs have also increased by 100,000 to 200,000 tsubo per tsubo compared to a few years ago.