Residential construction in Japan - statistics & facts
New housing construction in Japan declined for the first time in three years in 2023. What stood out was a sharp decline in new privately owned housing starts. Demand for new homes is projected to enter a downward trend in the coming decades due to Japan’s rapidly aging and declining population. But there were other reasons behind the decline in new housing construction in 2023, such as inflation and rising interest rates.
With Japan’s population being on the decline, housing construction is projected to enter a downward trend in the coming years. In 2023, housing starts shrank by 4.6 percent, the first decline in three years. The number of construction starts for owned housing units dropped the sharpest by 11.4 percent year on year. Detached houses for sale also saw a six percent decline.
What are the factors leading to the decline in demand for new homes in 2023? Since the pandemic, construction costs have been on the rise due to higher material and labor costs. Inflation, rising land prices and interest rates, which spilled over to mortgage rates, made the purchase of a new home less affordable for consumers. This is likely why the number of construction starts for privately owned homes, often custom-built detached houses, have seen such a sharp decline.
Japan’s rapid demographic change will inevitably affect demand for new residential properties in the long term. The government’s plan to align the housing sector with its climate targets is also likely to have implications for the housing construction industry. Housing starts are projected to enter a downward trend in the coming years. At the same time, the renovation market is forecasted to grow amid a new focus on the existing stock of homes and sustainability.
Reasons behind the decline in housing starts
Every year, over 800 thousand new housing units are built in Japan. This is a high number of new homes, given the country’s already massive housing stock and a rising vacancy rate, equivalent to nine million vacant housing units.With Japan’s population being on the decline, housing construction is projected to enter a downward trend in the coming years. In 2023, housing starts shrank by 4.6 percent, the first decline in three years. The number of construction starts for owned housing units dropped the sharpest by 11.4 percent year on year. Detached houses for sale also saw a six percent decline.
What are the factors leading to the decline in demand for new homes in 2023? Since the pandemic, construction costs have been on the rise due to higher material and labor costs. Inflation, rising land prices and interest rates, which spilled over to mortgage rates, made the purchase of a new home less affordable for consumers. This is likely why the number of construction starts for privately owned homes, often custom-built detached houses, have seen such a sharp decline.
New energy-saving requirements for new homes in 2025
The government wants the housing sector to play a large part in achieving its carbon neutrality targets set for 2050. Starting in April 2025, all new buildings in Japan will be required to meet specific energy-saving standards regarding insulation performance and energy consumption. The government further wants to raise energy efficiency levels for new buildings to net zero energy house (ZEH) standards by 2030 and aims to expand this standard to the existing housing stock by 2050. Around 33.5 percent of new custom-built single-family homes were net zero energy houses in the fiscal year 2022.Japan’s rapid demographic change will inevitably affect demand for new residential properties in the long term. The government’s plan to align the housing sector with its climate targets is also likely to have implications for the housing construction industry. Housing starts are projected to enter a downward trend in the coming years. At the same time, the renovation market is forecasted to grow amid a new focus on the existing stock of homes and sustainability.
