Japanese investors eye Australian residential real estate

“Land supply is very important for the growth of the housing business,” Mr Naganawa said in an interview.

“We would like to start by ourselves here. But if there is any opportunity for a joint venture we’d still be open for that, too.”

Competition is heating up among Japanese investors for opportunities in Australian real estate, which surged to a record $2 billion-worth of investment last year.

Australia’s population-driven growth story is a drawcard – particularly in residential property – that stands in contrast to Japanese investors’ home market, hampered by an ageing and shrinking population.

Australia and the US are the only two overseas markets in which AKH is investing.

“Overseas business should continue to be the main growth driver for AKH,” Mr Naganawa said.

While the post-HomeBuilder hangover is largely over – the pandemic incentive payment program of the former Coalition government pulled forward demand for detached homes, causing new activity to later slump – land, materials and financing costs still make many new projects unviable because potential customers can’t borrow enough to cover the cost of a new home. However, there are signs that activity is returning.

Official figures last week showed new detached housing starts rose 4.8 per cent in the March quarter and the Housing Industry Association, which represents builders such as NEX – previously McDonald Jones Homes – said new home sales volumes rose 15.7 per cent in the June quarter.

This points to a need for home builders to once again secure land and other resources. AKH, part of the ¥1.48-trillion ($13.5 billion) Tokyo-listed chemical company Asahi Kasei Group, wants to get into the land business during the three-year strategic period to 2027 it is currently preparing.

“We are preparing our mid-term business plan … from 2025 to 2027,” Mr Naganawa said. “By the end of this next mid-term business plan, we would like to have some sort of presence [in land development].”

Rival Japanese builders such as Sumitomo Forestry Group are already in land development in Australia. Daiwa House last year said it also wanted to expand into that sector.

NEX Building Group’s earnings for the financial year to March – in line with the Japanese financial year – show a strong year. Revenue rose 16 per cent to $1.45 billion and pretax profit nearly doubled to $59 million from $31 million.

But the home-building market has been shrinking. The HIA’s ranking of the country’s largest builders by housing starts shows that NEX’s total starts sank to 2865 in the year to June 2023 from 4143 a year earlier. Even so, it only slipped one place to third-largest, after Metricon Homes (4693 starts) and ABN Group (3506).

Interest rates were key, Mr Naganawa said.

“We’re doing very good as we sell a shrinking market or difficult time, but our biggest concern is the interest rate, because it will definitely directly affect the consumers and their willingness to buy house now.”

AKH is also competing with other Japan-owned home builders. Sumitomo Forestry Group, which owns Henley Homes, Edgewater Homes, Scott Park and Wisdom – and also develops land for home building – posted a 42 per cent jump in revenue to $1.6 billion for its financial year to December.

It also swung to a pre-tax profit of $33.3 million from a loss of $20 million, and made net after tax profit of $19.9 million after a $23.7 million loss.

Misawa Homes Australia, the owner of Homecorp, which operates in Queensland and SA, reported a 29 per cent jump in revenue for its financial year to December 2023 to $258.6 million, with pre-tax profit jumping 50 per cent to $7.4 million and net profit leaping 80 per cent to $5.6 million.

Daiwa House, the owner of builder Rawson Group, by contrast, suffered a one-third drop in revenue to $254 million. It swung to a pretax loss of $43.5 million from a $10 million profit and its net after tax loss widened to $50.6 million from $5.8 million in the year to December.