DAIWA House Industry Co, Japan's second-biggest homebuilder by market value, wants to cut local costs and expand in China as the developer is concerned a property "bubble" may burst, slashing land prices.
"The property market has become dangerous," Takeo Higuchi, chairman of the Osaka-based homebuilder, said in an interview with Bloomberg News. "I wouldn't be surprised if the real estate bubble goes bust."
Shrinking market
Land prices are key for Japanese homebuilders like Daiwa House because declines in population are shrinking the residential construction market. Housing starts in the first half of this year averaged about 23,000 a month fewer than they did 20 years ago.
Daiwa House wants to build condominiums in China and Vietnam and is increasing sales of cheaper steel-frame homes in Japan. The company also is investing in energy and research into rechargeable batteries.
Japan's Ministry of Health, Labor and Welfare in December predicted the country's population would drop to 95.2 million by 2050 from 127.8 million in 2005 because people are marrying later in life and having fewer children. That compares with a January 2002 forecast for a 21 percent decline in the population to 100.6 million by 2050.
The homebuilder's overseas expansion plan is a positive move, considering the shrinking market at home, said Yoji Otani, an analyst at Credit Suisse Group. Even so, it may be difficult for Daiwa House to meet the needs of consumers in foreign markets, he said.
"Homes are a highly local product," Otani said. "It may be risky for a foreign builder to expand broadly into another country's market."
Annualized housing starts fell 23 percent in July from a year earlier to 947,088.