Japan housing starts may drop to a 48-year low as a sluggish economy discourages homebuyers, Takeo Higuchi, head of the country’s largest home builder, said.

Annual starts could slump as low as 600,000 in “coming years,” Higuchi, chief executive officer of Daiwa House Industry Co., said. Starts are likely to drop more than 20 percent to 800,000 in the current year ending March.

“The property market will remain sluggish for another year or two because Japan’s economy is in bad shape,” Higuchi said in an interview this week. “High unemployment and falling wages are scaring away many potential buyers.”

The Osaka-based home builder, the nation’s biggest by sales, is expanding in China and Vietnam as its business declines at home. Sales are forecast to drop 7.2 percent to 1.57 trillion yen ($18 billion) in the year ending March.

Japan’s dwelling starts were 1.04 million last year, down from a peak of 1.9 million dwellings in 1972, according to data compiled by Ministry of Land, Infrastructure, Transport and Tourism. Starts of 600,000 would be the lowest since 1961.

The nation’s unemployment rate touched a postwar high of 5.7 percent in July and wages have declined for 17 consecutive months.

Daiwa House is investing 30 billion yen on housing developments in Dalian and Suzhou in eastern China, and plans to invest 30 billion yen in Zhejiang province. The home builder is in talks with Baoye Group Co., a Chinese developer, to form a joint venture in Zhejiang to develop luxury houses in the region. (Bloomberg)