Slowing Tokyo Housing Market May Hurt Overall Growth

Tokyo–The Tokyo housing market–hurt by delays and an increasing amount of unsold homes–could knock a full percentage point off growth in 2008, according to the International Herald Tribune.A scandal involving doctored new residential building engineering data caused a regulations overhaul in the area; new rules, implemented later than anticipated in June, state that new buildings must undergo additional structural calculation checks.The new process has delayed construction approvals by several months.”Developers are running their businesses on a hand-to-mouth basis,” Hiroyuki Ito of Azel Corp., a developer, told the Herald Tribune. “We cannot sit back on condominiums that are not selling.” Housing starts in the second half of 2007 fell 30 percent compared to 2006–cutting four-tenths of a percentage point off economic growth for the year.Real estate socks such as Mitsui Fudosan and Mitsubishi Estate also took a hit. The construction issues contributed to more than 60 small firms going into bankruptcy and cost hundreds of workers–ranging from plumbers to printers–their jobs, the Herald Tribune said.However, the government feels that once builders adapt to the new regulations, the market will recover and housing investment could grow 9 percent over the next year. But, as activity picks up, demand has fallen. Sluggish wages and reduced business opportunities caused consumers to reduce home purchases–and left developers with unsold condominiums.That, in turn, slowed new construction. In March–the latest month for which data are available–housing starts plummeted 15.6 percent from the year before.New Tokyo-area condo sales dropped to a 14-year low in the year to March and average prices swelled to a 15-year high, according to property market research firm the Real Estate Economic Institute.