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Thursday, April 1, 2010

Opportunity knocks for home improvement sector

Energy-efficiency incentives may get owners to refurbish rather than rebuild

Staff writer

Refurbish your windows and other parts of your house and win a free stay at a luxury resort hotel.

News photo
Doing it yourself: A man checks out a double-glazed window at a YKK AP Inc. booth at the Bic Camera in Tokyo's Yurakucho district Wednesday. YOSHIAKI MIURA PHOTO

That's just one of the campaign advertisements launched by housing products maker Tostem Corp. to stimulate demand for renovations in response to a government incentive program that kicked off in March.

The energy-saving incentives are likely to spur consumer demand for making older houses more comfortable amid the economic slump and, at least for a while, help the economy, experts say.

They have also prompted the housing products industry to seize the opportunity and launch campaigns like Tostem's.

The government started accepting applications March 8 under the Housing Eco-point incentive program that encourages people to build or buy environmentally friendly new houses or make their houses more energy-efficient through renovations.

Applicants can receive up to 300,000 points, with each point worth ¥1, by purchasing energy-efficient products, including double-glazed windows and wall insulation between Jan. 1 and Dec. 31. For people buying new houses or condominiums, the incentive applies for those start to be built between last Dec. 8 and this Dec. 31 that meet specific energy-efficiency criteria.

The points can be used to purchase other types of housing materials or donated to conservation groups.

The number of applications so far has not been disclosed.

Building and housing facility maker YKK AP Inc. plans to open 100 outlets in April where employees will assess the quality of insulation and soundproofing of windows and provide advice to customers on renovations. The company says it will increase the number of outlets to 300 within three years.

YKK AP has tied up in January with the Bic Camera Inc. discount electronics chain to set up booths in stores to entice customers into making renovations.

Meanwhile, consumers appear to welcome such government incentives amid the gloomy forecast for wages.

"I appreciate the government program because the economy is not very good," a 62-year-old businessman said at a YKK AP booth at the Bic Camera in Tokyo's Yurakucho district. He was taking a close look at an inner window that can be placed inside an existing window to shut out cold air and noise.

"I live in an old house with my wife and it is extremely cold in winter. I wonder if I should at least fix our windows to make it warmer inside," he said, adding he is leaning toward window renovations over rebuilding the 30-year-old house because it would cost too much.

"The effect of the Eco-point program is widely believed to be worth around ¥400 billion, but I expect it to go beyond that," said Osamu Nagashima, a real estate consultant at Sakurajimusyo Inc., which offers consulting services for consumers to purchase and renovate their housing.

Nagashima said there is strong potential demand for renovations as more people opt to buy less expensive secondhand housing amid the economic downturn rather than new, high-priced houses. These people refurbish their floors, walls and ceilings at limited costs.

Such buyers will improve their windows and other parts of their houses thanks to the government incentives, Nagashima said.

Tsuyoshi Kubota, a researcher in charge of macroeconomic matters at Teikoku Databank Ltd., said the Eco-point system alone is expected to increase renovations by 50,000 instances in fiscal 2010.

The research institute estimates the program will boost consumer spending by ¥174 billion in fiscal 2010 and ¥430 billion in fiscal 2011, while pushing up real gross domestic product by 0.02 percentage point in fiscal 2010 and 0.04 point in fiscal 2011.

Among home purchases and projects that can be applied to the incentive grogram, window renovations will probably be the most popular because it costs around ¥580,000 on average per house, which is reasonable, he said.

Kubota said a ripple effect can be expected thanks to the housing industry's wide range of products. The transportation industry, which moves housing materials, and wiring and water pipe businesses are among other areas that will also feel the effect of the incentives, he said.

Needless to say, however, the program's effect on the economy as a whole will be limited. "The incentives certainly have some effect on shoring up the economy," Kubota said. "But they are just a one-time shot."

If the government wants sustainable growth, it needs to ease people's concerns about the future, including the national pension program, and demonstrate it has "a vision for the future," he said.

Nagashima of Sakurajimusyo said the incentive program would provide further stimulus for demand if it covered a wider range of environment-friendly products, such as solar panels and electric water heating systems.

The government should also provide more points, up to 1 million, to make it easier for people not only to fix windows but to engage in larger renovations, he said.

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