Yomiuri Shimbun Staff Writer

Major Japanese homebuilder Daiwa House Industry Co. has announced that it will restructure its new detached house business, strengthening sales in big cities such as Tokyo and Osaka while discontinuing new sales in 23 prefectures in April 2027.

The company aims to improve the profitability of its detached house business by downsizing operations in less populated areas amid surging material costs and labor expenses.

Daiwa House currently operates its detached house business in all of Japan's 47 prefectures except Yamagata and Okinawa. The company on Friday said it will stop accepting new orders by the end of March next year in the targeted 23 prefectures, which include Hokkaido and those in the Tohoku and Shikoku regions. It will continue to provide after-sales services to existing homeowners.

The company will reassign about 200 sales staff from the 23 prefectures to offices in the remaining regions to concentrate management resources in key urban areas.

Daiwa House believes that room for growth still remains in areas such as home renovations and purchasing of pre-owned houses even in the 23 prefectures, so it will strengthen operations by consolidating subsidiaries in charge of the businesses.

According to statistics from the Japan Housing Finance Agency, the average construction costs of custom-built houses rose to 42.59 million yen in fiscal 2025 (ended in March 2026), up about 30% from 10 years before.

Homebuilders now face significant challenges in predicting demand, particularly in rural areas experiencing rapid population decline, ultimately leading to a deterioration in profitability. According to the Land, Infrastructure, Transport and Tourism Ministry, new housing starts for custom-built homes totaled 195,111 units in fiscal 2025, down 12.6% from the previous fiscal year. While the rate of decline ranged from 9.1% to 10.7% in the three major metropolitan areas surrounding Tokyo, Osaka and Nagoya, the decline in other regions reached 15.4%.

Meanwhile, demand for high-end new homes remains strong in urban areas, despite soaring construction costs. The average price of custom-built homes -- buildings only -- sold by Daiwa House reached about 53 million yen in fiscal 2025. The homebuilder sold about 200 homes priced at over 100 million yen, primarily in urban areas.

Going forward, Daiwa House plans to set a benchmark of 50 million yen for selling homes that can be freely customized to increase the average unit price. For standardized homes, where customers select from pre-designed plans, the company will also offer properties priced between 30 million and 40 million yen.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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