■Outlook for Intellex <8940>

3. Long-term Outlook for Renovated Residence Market

Looking at the market trends for residences in the Tokyo metropolitan area in 2023, the number of used residence transactions increased by 1.6% compared to the previous period to 35,987, a growth for the first time in 2 years. On the other hand, the supply of new residence units decreased for the second consecutive period by 9.1% to 26,873. The rising construction costs continue to drive up selling prices, resulting in a decrease in the supply of units in three prefectures other than Tokyo. As for Tokyo, the supply in the 23 special wards increased by 10.3%, while the rest decreased by 3.9%. The supply of new residence units in 2024 is expected to increase to 280,000 units, while the number of used residence transactions has been steadily strong, increasing by 6.4% compared to the same period of the previous year from January to June. This indicates that the majority of the demand for residences in the Tokyo metropolitan area is likely to be occupied by used residences.

Looking at the medium to long-term perspective, the used residence market has formed a stable market due to the accumulation of stock, and the demand for renovated residences is expected to show steady growth. According to a survey by the Ministry of Land, Infrastructure, Transport and Tourism, the total residence stock in the country stood at 6.859 million units as of 2021. Among these, approximately 2.491 million units, accounting for about 36% of the total, are properties that are 30 years or older and require renovation. It is estimated that this will expand to approximately 5.884 million units by 2041, nearly 2.4 times the current level. With the revision of the Residential Building Renewal Promotion Act in 2022, the requirements for rebuilding a single building have been relaxed, which may lead to an increase in the replacement of aging residences. However, we expect the market for used residences to continue its mainstream practice of renovating and selling units individually.

*Previously, the requirements for rebuilding included the need for approval from over 80% of all owners. With the revised law, it is now possible with the approval of over 75% of known owners, excluding those with unknown whereabouts.

Furthermore, amidst the government's policy to achieve a decarbonized society, there is a high possibility of continuing measures to promote energy efficiency in existing residences through initiatives such as housing loan tax breaks and subsidies. We expect the next few years to be a prime opportunity for the company, which has a wealth of experience in interior renovation work and has taken the lead in promoting the widespread adoption of energy-efficient renovated residences with the strategic product 'Eco Cube'. Additionally, if the FLIE business, which resembles a stock-based business model, generates income, it will further improve revenue stability, and the company will be well-positioned to achieve sustainable growth. Therefore, the future trends are highly anticipated.

(Written by FISCO guest analyst, Jo Sato)