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 enabled an increasing proportion of the population to live in nuclear families.
Today, Japan is facing a demographic shift with an aging and declining population that has negative implications for the residential real estate market. The population is projected to decrease by around six million by 2030. The share of single households has increased over past decades and the average number of members per household has decreased to 2.3.
The demographic shift is one of the reasons for an increasing share of vacant and abandoned houses 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 focus its policies on the promotion of home renovations and the existing housing stock.

Residential real estate in Japan

New residential construction has remained stable in recent years, but following the outbreak of the global coronavirus pandemic, commencement of new building projects has slowed. In 2020, owner-occupied homes accounted for nearly 50 percent of new constructions, followed by 30 percent for homes for sale and 20 percent for rental housing. In Japan, a great proportion of residential real estate transactions is comprised of the sales of newly constructed dwellings. In recent years, more than 60 percent of housing loans issued by private financial institutions were directed at financing new home purchases. Compared to other economies, the existing housing market is relatively small, with existing home transactions accounting for about 14 percent of new dwelling construction starts in 2019. One reason for this is the widespread belief that dwellings only have a short life span and rapidly depreciate after construction. The low prospects of selling-second hand houses at a high price make it unattractive for owners to invest in the renovation of their houses. Instead, second-hand houses are often demolished and rebuilt.

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