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Building Scandal Falters Drop In Residential Construction In Japan

A drop in new residential construction starts was recorded in October, a first time occurrence for the past 8 months owing to a sharp decline in condominium building that is believed to be caused by a weak foundation work, Asian Review reports.

On Monday, Japan's land ministry reported a 2.5% drop on the year to 77,153 units, and 10% decrease coming from a near-term high in June.

Last year, the number of big projects in the Tokyo area attributed to a good result standing but new multiple family condominium construction dropped 17.2% to just 8,690 units this year. The decline furthered to 22.4% in September which is reflective of a sluggish condo sales in Tokyo; affecting and driving the whole market.

According to the ministry, a construction data tampering scandal involving a leaning apartment building in Yokohama have come to their attention but believes it is not affective. The most recent housing starts report since the faulty data issue came up in mid-October reveals an increase in Kanagawa Prefecture, including Yokohama and other regions. Construction and sales were even believed to have moved "according to plan" if for Nomura Real Estate Development's October report.

However, "one can't rule out that some developers are putting off construction to gauge buyer sentiment,"  says Sumitomo Mitsui Asset Management's chief economist, Akiyoshi Takumori.

The full effect of the scandal is however anticipated to affect the market in the coming months. As far as developers are concerned, they are yet to lower their sales forecast. While Mitsui Fudosan have recorded a slow in model home visits than in October, it is believed to be caused by less advertising efforts following the exposure of leaning Yokohama apartments. A subsidiary handled marketing of the units in that complex.

Housing starts has started to pick up since the aftereffect of the homebuying rush following consumption tax hike in April of 2014. "A full-fledged recovery has become a more distant prospect," according to Mizuho Securities economist, Toru Suehiro. 


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