Market Overview

The size of the ZEH market in FY2023 was 6,571,200 million yen, up 61.4% from the previous fiscal year (based on the construction costs). Roughly 40% were detached houses (ZEH detached houses) and 60% were multi-unit dwellings (ZEH condominiums *1). There was a significant gap between ZEH detached houses and ZEH condominiums in CAGR over the past three fiscal years (FY2021–2023), with the former growing at 19.1% and the latter at 163.5%. The rapid growth of ZEH condominiums was driven primarily by major developers who have been actively promoting net zero energy standard buildings.

Japan’s energy policy outlined in the “Basic Energy Plan” targets the household sector to “raise energy efficiency standards (higher) to the level of ZEH” by FY2030. In response, condominiums planned/built/sold from early 2020s by residential building developers are certified ZEH Oriented or above *2. This has significantly propelled the expansion of the ZEH condominiums market.

*1. There are two ways to count the number of homes in multiple-dwelling buildings (condominiums, apartments) meeting net zero energy standards: (1) by the number of buildings (ZEH-M) and (2) by the number of each dwelling (ZEH). In this report, ZEH regarding multi-unit dwelling buildings are counted on (2), and the market size by value are independently estimated by Yano Research Institute based on publicly available data by Sustainable open Innovation Initiative (SII) and “Building Starts Statistics” by the MLIT. To distinguish detached houses from homes in multiple-dwelling buildings, the former are referred to as " ZEH Detached Houses," and the latter are indicated as "ZEH Condominiums."
*2. “ZEH Oriented” in multiple-dwelling buildings refers to a condominium that achieved at least 20% energy savings. The introduction of renewable energy (solar power system) is not required.

Noteworthy Topics

Expansion of Government Grant Increases ZEH Residences / Challenges Remain in Short Implementation Timeframe and Regional Disparities

To increase ZEH residences, the Japanese government has expanded grant programs. Homebuilders and condominium developers are also actively leveraging programs**, such as the ZEH Grant Program, Child-rearing Green Housing Support Program (formerly called Child-rearing Eco Home Support Program) and the Energy-Saving Water Heater Program, to increase the number of ZEH properties.
However, the timeframe of these programs is often for a single fiscal year. Because construction must be completed within a fiscal year, projects tend to concentrate in the first half, leading to scheduling bottlenecks and straining resource management at homebuilders.
Regional disparities also remain a challenge. While the amount of grants is uniform nationwide, colder regions generally bear additional cost stemming from higher technical hurdles (need for better insulation materials) to meet ZEH standards.


**Translator’s note: Only homebuilders and developers qualified as "Green Building Businesses” are eligible to apply for the programs mentioned. Individuals (homeowners) cannot apply for the grants.

Future Outlook

The market size in FY2035 is forecasted to reach 17.27 trillion yen, growing at a CAGR of 4.3% between FY2030 and FY2035. Due to the declining population and the surplus in housing stock, new housing starts will decline in the long term for both detached houses and condominiums. Meanwhile, in line with the Seventh Energy Basic Plan that targets "all buildings, where it is reasonable, to install solar (PV) power systems by 2050”, all detached houses will transition from “detached houses aiming to achieve net zero” to the “ZEH detached house” or “Nearly ZEH” *3.

Moreover, there is no doubt that the condominiums will be required to have PV systems, shifting from ZEH Oriented to “ZEH condominiums”, Nearly ZEH, or ZEH Ready. Because this involves more high-performance insulation materials and equipment with higher energy-saving performance, construction costs are expected to soar further. Given the circumstances, we forecast that the ZEH market will continue to grow beyond FY2030.


*3. Detached houses aiming to achieve net zero indicate the houses that achieved at least 20% energy savings without a solar power system installed, or those that have solar power system installed but have only achieved net energy savings of less than 75%.

Research Outline