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Residential real estate in Japan - statistics & facts

Japan has a population of around 125 million and its homeownership rate has remained at 60 percent for the past decade. Housing and household structures have undergone a significant transformation during the postwar period of economic growth. Today, a demographic shift and an aging society are posing a challenge for the future of the residential real estate market and have resulted in an increase of vacant and abandoned homes across the country.

Demographics and development of housing in Japan

In the years following the end of the war, Japan experienced a severe housing shortage. To meet the demand, the government responded with a large-scale provision of public housing. New multistorey apartment building complexes made of concrete called “Danchi” became a symbol for prosperity during the period of economic recovery in the 1960s. This had an impact on lifestyles and led to a transformation of household structures. While multi-generational households living under one roof had been the norm in the pre-war period, the provision of apartment buildings resulted in an increasing proportion of the population living in nuclear families.
Today, Japan is facing a demographic shift with an aging and declining population that has implications for the residential real estate market. A sharp population decrease is projected for the coming decades, accompanied by a rising share of single households and a decline in the average number of members per household.
The demographic shift is one of the reasons for the high share of vacant and abandoned houses across Japan that is especially apparent in rural areas, as Japan’s population and economic activity are largely concentrated in Tokyo and other metropolitan areas. This development and a comparably small existing housing market have prompted the government to refocus its policies on the promotion of home renovations and the utilization of the existing housing stock.

Second-hand housing market

In Japan, a great proportion of residential real estate transactions is comprised of the sales of newly constructed dwellings. Compared to other economies, the existing housing market in Japan is relatively small, with existing home transactions estimated to account for about 14 percent of new dwelling construction starts. A preference for new housing among Japanese consumers is based on the widespread perception that dwellings have a short life span. This is partly due to the fact that during the period of rapid economic growth, emphasis was placed on a quick supply of affordable housing rather than on the quality and durability of dwellings. Newly built homes quickly depreciate after construction and the low prospects of selling-second hand houses at a good price makes it unattractive for owners to invest in the maintenance and renovation of their homes. Instead, second-hand houses are often demolished and rebuilt.

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